Why Crummey Powers Matter
The annual gift tax exclusion only covers present interest gifts the recipient can use right away. A gift to a trust is normally a future interest and would not qualify. By giving each beneficiary a short window to withdraw their share, the gift becomes a present interest and qualifies for the exclusion.
How It Works in an ILIT
An irrevocable life insurance trust is the most common use case. Each year, the grantor contributes the insurance premium. The trustee sends a Crummey notice to each beneficiary describing the new contribution and the withdrawal window. Beneficiaries usually allow the window to lapse so the funds remain in the trust to pay premiums.
Arizona Drafting Backdrop
The withdrawal right is read together with general fiduciary definitions under A.R.S. 14-7501 when the trustee accounts to beneficiaries each year.