Gifting Your Assets - A Crummey Trust Can Protect Against IRS And Creditor Claims

  • Our Guarantee to Our Clients

    We promise to represent your best interests and keep you fully informed.

    Read Our Guarantee
  • Bankruptcy eBook

    Get a FREE eBook to become more familiar with the bankruptcy process.

    Download It Here
  • Our Video Center

    Click here to access a list of our firm's videos.

    Get More Information
  • When You're Ready To Talk

    We're ready to listen. Contact us to receive a free initial consultation.

    Request a Consultation

Gifting Your Assets - A Crummey Trust Can Protect Against IRS And Creditor Claims

Many hard-working individuals naturally want to pass on their assets to their family -- the people they care about the most. In this post, we will discuss the Crummey Trust and how this trust can play an essential role in a comprehensive estate planning strategy, as well as some of the challenges presented to this type of trust by interested external parties.

The Crummey Trust Explained

A Crummey Trust is typically used by parents who want to extend gifts to their children without the IRS imposing any gift tax penalty upon either the grantor or the gift recipient. For the tax year 2018, the maximum gift amount was $15,000 per recipient. For the tax exclusion to apply, the following stipulations must be met:

  • the beneficiary must have a "present interest" in the gift,
  • those 18 and over must be granted immediate access to withdrawal of the gift,
  • the withdrawal typically must be made within 30 to 60 days,
  • any monies left after the withdrawal period are subject to withdrawal rules set by the trust grantor.

In some cases, a parent may create this type of trust and regularly gift to their minor children. These minor children are not allowed to withdraw from the trust, thereby allowing the trust to continue to build in value. The trust grantor (parent) will typically set up withdrawal rules during the creation of the trust in order to stipulate at what age, 18 and beyond, their child can begin to make actual gift withdrawals from the trust.

Challenges to the Crummey Trust

In a recent court case, Mikel v. Commissioner, the IRS tried to make the argument that an in terrorem clause in a Crummey Trust per se shows that withdrawal rights are illusory. Fortunately the taxpayer won the case, thus protecting their trust from the reaches of the IRS and any other potential creditors. If you would like to know more about setting up a Crummey Trust for your beneficiaries, please contact us! We can help with all your estate planning needs including living wills, granting power of attorney, charitable trusts, advance directives and more.

  • Our Guarantee to Our Clients

    We promise to represent your best interests and keep you fully informed.

    Read Our Guarantee
  • Bankruptcy eBook

    Get a FREE eBook to become more familiar with the bankruptcy process.

    Download It Here
  • Our Video Center

    Click here to access a list of our firm's videos.

    Get More Information
  • When You're Ready To Talk

    We're ready to listen. Contact us to receive a free initial consultation.

    Request a Consultation

When You're

Ready to talk

Our firm is ready to listen. Call for a FREE case consultation.

Call Toll-Free 888.910.6652

"The Law Offices of James C. Shields is located in Torrance and proudly serves clients all throughout the South Bay including:

  • Long Beach
  • Carson
  • Irvine
  • Los Angeles
  • Palos Verdes Estates
  • Huntington Beach
  • Hermosa Beach
  • Redondo Beach
  • Manhattan Beach
  • Newport Beach
  • Costa Mesa
  • El Segundo
  • Rolling Hills
  • Hawthorne
  • Playa Del Rey and Culver City
Law Offices of James C. Shields - Torrance Bankruptcy & Estate Planning Attorney
Located at 21707 Hawthorne Blvd, Suite 204
Torrance, CA 90503.
View Map
Phone: (888) 910-6652
Local Phone: (310) 626-4404

Website:
© 2019 All Rights Reserved.