In the last FBO Bulletin we discussed some tax shorthand phrases one of which was Crummey as in Crummey Letters.
This deals with the contributions to trusts that establish the gift as a present interest (often using the precious $18,000 annual exclusion).
If this does not affect you and ring a bell you may want to stop reading now but if it does read on.
Nearly all professional advisors recommend sending out the Crummey letters on a regular, consistent, and timely basis and we recommend the same.
The practice of sending out the letters is well accepted for gifts to trusts of all kinds and is seen often with Irrevocable Life Insurance Trusts (ILITs). The problem is that from an administrative standpoint it is burdensome and attending to the details often get overlooked as time and attention gets diverted with the niggling details of life. If that is the case and you have not sent the Crummey letters as you should have – we say don’t panic. There are several things that can be done to remedy the matter somewhat retroactively. Even if those do not work if the letters have not been sent there is a substantial position that there is no requirement for written notice at all. This argument, as with most tax matters, gets technical, doesn’t always work but does have support to give one comfort.
In conclusion, it is general practice that Crummey letters be sent out but if they have not been,check with your professionals to review your situation with care.
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