CRUMMEY Meaning and
Definition
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Crummey is an adjective used to describe a particular type of trust that allows beneficiaries to receive annual gifts from the trust, while still preserving their rights to the trust's assets. It is typically applied in the context of estate planning and the creation of irrevocable trusts.
The term "crummey" originates from the landmark court case Crummey v. Commissioner, which established the legal basis for this type of trust. In a Crummey trust, the settlor (the person who creates the trust) designates a certain amount of money or property that can be gifted to beneficiaries each year. By utilizing the annual gift tax exclusion, the settlor can substantially reduce their taxable estate.
The unique aspect of a Crummey trust is that the beneficiaries have a limited period, typically 30 days, within which they can withdraw the gifted funds. This withdrawal right is crucial as it transforms the gift into a present interest, thus making it eligible for the annual gift tax exclusion. After the withdrawal period expires, the gifted funds remain in the trust, preserving their tax advantages.
By employing Crummey trusts, settlors can transfer assets to their chosen beneficiaries while minimizing estate taxes. This type of trust provides a balance between tax planning and maintaining control over an estate, as the settlor has the power to determine the amount and timing of the gifts. However, it is important to comply with all legal requirements and consult with professionals experienced in trusts and estate planning to ensure the effectiveness and appropriateness of a Crummey trust for individual circumstances.
Etymology of CRUMMEY
The word "crummey" is of Newfoundland and Labrador origin. It derives from the surname "Crummey", which was a common surname among Irish immigrants who settled in Newfoundland. The name "Crummey" likely originated as an anglicized version of an Irish Gaelic surname, but the exact etymology of the Irish original is uncertain. Over time, the term "crummey" came to be used as an adjective to describe someone or something from or related to Newfoundland, particularly reflecting the cultural and linguistic influences of Irish immigrants.
