Crummey trusts are an important tool for estate practitioners looking to help their clients take advantage of the annual gift tax exclusion. Despite their relative popularity, Crummey trusts are sometimes challenged by the Internal Revenue Service (IRS).1 A recent U.S. Tax Court case, Mikel v. Commissioner2 reviewed the continuing viability of Crummey trusts when the trust contains an arbitration clause and an in terrorem clause. The decision is an important lesson and review for estate practitioners who utilize these types of trusts in their practice.
Utilizing Crummey Powers
Under federal tax law, individuals can give up to $14,000 a year to family or friends tax-free, provided the donee has a “present interest” in the money and can access the money right away. See Section 25.2503-3(b), Gifting Tax Regs. which defines a present interest as “an unrestricted right to the immediate use, possession, or enjoyment of the property or the income from property such as a life estate or term certain.”
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
