What Is a Crummey Trust and Why Does It Matter?
Crummey Trusts are an estate planning strategy for high-net-worth individuals that can allow gifts to irrevocable trusts to qualify for the annual gift tax exclusion. But are they necessary for everyone? With today’s high lifetime estate exemption ($13.99 million per person in 2025), many families may not owe an estate tax at all, even when gifting above the annual exclusion. That doesn’t mean Crummey powers are never useful, but individuals considering a Crummey Trust should consult an estate planning lawyer near them to determine the best strategies available.
What Is a Crummey Trust?
A Crummey trust is not a distinct type of trust. Rather, it is an irrevocable trust that includes Crummey powers, which are special withdrawal rights granted to beneficiaries. These rights allow contributions made to the trust to qualify for the IRS annual gift tax exclusion.
Typically, gifts to irrevocable trusts are treated as future interests and do not qualify for the annual exclusion. Crummey powers are used to transform those gifts into present interests, which are eligible for the exclusion.
Do You Even Need a Crummey Trust?
In 2025, you can gift up to $19,000 per person per year without using any of your lifetime exemption. Even if you give more than that, you may not owe gift tax unless your total lifetime gifts exceed $13.99 million (or $27.98 million for married couples).
So why consider a Crummey Trust? Because without Crummey powers, gifts to irrevocable trusts are considered future interests and don’t qualify for the annual exclusion. That means they reduce your lifetime exemption, even if you don’t owe tax today.
For most families, a single overlimit gift may not be a concern. But if you’re:
- Making recurring gifts over time
- Hoping to preserve your exemption in case of lower limits after 2025
…then a Crummey Trust could help you maximize your tax-free giving.
What Are Crummey Powers?
Crummey powers give beneficiaries a temporary, legally enforceable right to withdraw trust contributions, usually for a window of 30 days. Even if the beneficiary never exercises the right, it still satisfies IRS requirements as long as the following are met:
- The withdrawal right is real and legally enforceable
- The beneficiary is notified in writing (a Crummey notice)
- The beneficiary has a reasonable window to act
What Is a Crummey Letter (and Why Is It So Important)?
A Crummey letter is a notice sent to each beneficiary (or their guardian) notifying them of: their right to withdraw a recent contribution; the amount contributed; and the timeframe for making a withdrawal
Without this notice, the IRS may deny the annual exclusion for that gift, requiring it to be reported as a taxable gift and potentially triggering gift tax consequences.
A proper Crummey letter should include:
- Date of the contribution
- Name of the donor and beneficiary
- Amount of the contribution
- Statement of the withdrawal right
- Deadline to exercise the right
- Instructions for notification
Best practice: Retain signed copies and proof of delivery (e.g., certified mail or email acknowledgment) to protect against audit issues.
FAQs About Crummey Notices
Do I need to send a Crummey letter every year?
Yes. A new notice must be sent for every contribution.
What if the beneficiary is a minor?
Send the notice to the child’s legal guardian or custodian. In Crummey v. Commissioner, the IRS initially denied the exclusion because no guardian had been appointed to exercise the right on behalf of the minors.
What if the beneficiary never withdraws the funds?
That’s common and perfectly acceptable. The IRS only requires that the right exists and is communicated, even if the beneficiary never withdraws the funds available.
Is proof of delivery required?
It is strongly recommended for audit protection.
Can Crummey notices be automated?
Yes. Many trustees and attorneys use calendar reminders or document automation tools to manage this task efficiently.
Why Work With a Rhode Island Irrevocable Trust Attorney?
While not every family needs a Crummey Trust, those who choose to establish one must implement it with precision to maintain the benefits of the trust structure and remain in compliance with trust terms. If you’re making large or repeated gifts to an irrevocable trust, especially through an ILIT (Irrevocable Life Insurance Trust) or a multigenerational wealth plan, it’s critical to use proper notices and trust language to protect your tax benefits.
At McCarthy Law, we help Rhode Island families:
- Evaluate whether a Crummey Trust is necessary for their goals
- Establish irrevocable trusts with compliant Crummey provisions
- Draft and track Crummey letters
- Structure lifetime gifts to reduce estate tax exposure
- Administer ILITs and gifting trusts with confidence
Secure the Right Strategy for Your Family’s Future
While the goal of reducing estate taxes for high-net-worth individuals can be admirable, there are often strategies that fit better with a family’s needs than the Crummey Trust. Whether you’re trying to reduce estate taxes, fund a life insurance trust, or make gifts to loved ones in a tax-smart way, the best strategy depends on your specific goals, assets, and family dynamics.
At McCarthy Law, we help you evaluate your full planning picture and determine which tools truly serve your long-term vision. From high-net-worth gifting strategies to simple legacy planning, our Rhode Island attorneys are here to help you explore your options and choose the best path forward.
Fill out the form below to book your free discovery call and learn more about how we can help you protect your assets.
About the Author
Attorney Daphne Hamilton is a Rhode Island Elder Law and Irrevocable Trust Attorney who helps families navigate estate planning, irrevocable trusts, probate, and real estate matters. Inspired by her family’s experience with dementia and guardianship, Daphne brings empathy and strategic guidance to every client relationship.
She earned her J.D. from Roger Williams University School of Law and is licensed in Rhode Island, Massachusetts, and Connecticut. At McCarthy Law, Daphne focuses on protecting clients’ assets and planning ahead for long-term care needs.
When she is not practicing law, Daphne enjoys nature walks, golfing with her husband, and spending time with her ragdoll cats, Sparrow and Dove.
