Houston Estate Planning and Elder Law Attorney Blog
Actually the trusts are Crummey trusts named after one D. Clifford Crummey who won a decision in the Ninth Circuit in 1968, when I was just a high school lad. Israel and Erna Mikel were just in Tax Court showing how powerful the Crummey power can be as they used it to shelter over $1.4 million in transfers to their family trust from gift taxes. An arbitration clause that called for the use of a religious court caused the IRS to challenge the validity of the exclusions, but the Tax Court ruled in the taxpayer’s favor.
Trusts can have pretty funny names. Take the Crummey trust for example – doesn’t sound very good, does it? Who wants a “crumby” trust? Let’s explore this tool further.
A recent Forbes article, titled “Religious Arbitration Clause Does Not Hurt Million Plus Gift Tax Exclusion,” reminds us that there’s an annual exclusion from gift tax. Reminder: every year you can give the annual exclusion amount ($14,000 this year) to as many people as you want without any gift taxes or disturbing the unified credit against transfer taxes. However, to qualify for the exclusion, the gift has to be of a “present interest”.