Which trust arrangement allows for annual gift tax exclusion through Crummey powers?

Which trust arrangement allows for annual gift tax exclusion through Crummey powers?

• A. Simple trust
• B. Complex trust with Crummey powers
• C. Vested remainder trust
• D. Life estate

Answer: (B)

Crummey powers convert a contribution to a trust into a present interest by giving the beneficiary a temporary, exercisable right to withdraw some of the gifted funds. Because the beneficiary can access the money within a limited window, the gift is treated as a present interest for gift tax purposes, making it eligible for the annual gift tax exclusion (up to the per‑donee limit each year). A complex trust that includes Crummey powers is set up to provide these withdrawal rights, so gifts to the trust routinely qualify for the annual exclusion. The other options don’t create that withdrawal window: a life estate and a vested remainder involve different interest types that don’t give beneficiaries a current right to withdraw contributed funds from the trust, and a simple trust typically lacks the discretionary framework needed to implement Crummey withdrawal rights.

Crummey powers convert a contribution to a trust into a present interest by giving the beneficiary a temporary, exercisable right to withdraw some of the gifted funds. Because the beneficiary can access the money within a limited window, the gift is treated as a present interest for gift tax purposes, making it eligible for the annual gift tax exclusion (up to the per‑donee limit each year).

A complex trust that includes Crummey powers is set up to provide these withdrawal rights, so gifts to the trust routinely qualify for the annual exclusion. The other options don’t create that withdrawal window: a life estate and a vested remainder involve different interest types that don’t give beneficiaries a current right to withdraw contributed funds from the trust, and a simple trust typically lacks the discretionary framework needed to implement Crummey withdrawal rights.