Drafting Crummey Powers

Gifts in trust normally do not qualify for the federal gift tax annual exclusion, but can qualify if beneficiaries are given limited rights to withdraw gifts from the trust. These withdrawal rights, usually known as “crummey powers,” are rarely exercised, and should be carefully drafted both to qualify for the annual exclusion and to avoid adverse gift tax consequences to the beneficiaries when the powers lapse without being exercised.

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