WHAT’S A CRUMMEY NOTICE AND WHY DO I CARE?

“Crummey” is actually a man’s last name; his estate planning case made headlines.  Making headlines, for estate planning matters, is rarely a good thing.  However, thanks to Dr. Crummey, we all, estate planning attorneys and clients, alike, benefit.

What’s a Crummey Notice?

A Crummey notice is used to transform what would otherwise be a future gift into a present gift.

Okay, we know that sentence makes no sense to non-lawyers.  We’ll try again; a Crummey notice saves you a lot of money that would otherwise go to pay taxes.

Bottom line:  Crummey notices save you and your family money!!

When are Crummey Notices Used?

Crummey notices are used when money is put into a life insurance trust.  Usually, this is once a year.

Who Gets a Crummey Notice?

The beneficiaries of the life insurance trust receive the Crummey notices.

What does a Crummey Notice Say?

A Crummey notice says, “A gift has been made to a trust of which you are the beneficiary.  You have the right to take out xxx dollars for the next 30 days.”

Do I Take the Money Out? 

No, whoever named you as the beneficiary and his or her attorney will likely explain to you that it is in your best interest to leave the money in the trust.  The money will be used to make life insurance premium payments of which you are a beneficiary.

Life insurance trusts and their Crummey notices are commonly used to save federal estate taxes, generation skipping taxes, and gift taxes.  Consult with a qualified estate planning attorney to learn whether this would work for you.