A Crummey Trust is an irrevocable trust designed to allow gifts to the trust to qualify for the annual gift tax exclusion. The key to this qualification lies in granting beneficiaries a temporary right to withdraw contributions made to the trust. This withdrawal right, known as a Crummey power, is essential. Proper notification is crucial. Sending a Crummey letter to each beneficiary (or their legal guardian if they are a minor) informs them of their right to withdraw the funds for a limited time, usually 30 days. Failing to send these letters can jeopardize the intended tax benefits, potentially leading to gift tax implications.
These letters are not merely formalities. They are legal documents that demonstrate that the beneficiaries have been informed of their rights. The letter should clearly state the amount of the gift, the beneficiary’s right to withdraw the funds, the timeframe for withdrawal, and the procedure for doing so. It is vital to keep copies of these letters, along with proof of mailing or delivery, as evidence of compliance with IRS requirements. Consulting with an estate planning attorney is highly recommended to ensure that your Crummey Trust and the associated letters are properly drafted and administered, specifically tailored to your individual circumstances.
Here are 13 sample Crummey letters. Remember to adapt them to your specific situation and seek legal advice. These samples are templates and should not be used without proper customization and review by a qualified attorney. Replace the bracketed information with the appropriate details.
Crummey Trust Letter Samples:
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Sample 1: Basic Notification
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
This letter is to inform you that [Grantor Name] has made a gift of [Dollar Amount] to the [Trust Name] trust for your benefit. You have the right to withdraw this amount from the trust for a period of thirty (30) days from the date of this letter. To exercise this right, please notify the trustee, [Trustee Name], in writing at [Trustee Address].
Sincerely,
[Trustee Name], Trustee -
Sample 2: Notification to Guardian of Minor
[Date]
[Guardian Name]
[Guardian Address]Re: [Beneficiary Name]
Dear [Guardian Name],
This letter is to inform you, as the guardian of [Beneficiary Name], that [Grantor Name] has made a gift of [Dollar Amount] to the [Trust Name] trust for the benefit of [Beneficiary Name]. [Beneficiary Name] has the right, through you as guardian, to withdraw this amount from the trust for a period of thirty (30) days from the date of this letter. To exercise this right, please notify the trustee, [Trustee Name], in writing at [Trustee Address].
Sincerely,
[Trustee Name], Trustee -
Sample 3: Letter with Disclaimer About Encouraging Withdrawal
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
I am writing to inform you that a gift of [Dollar Amount] has been made to the [Trust Name] on your behalf. As a beneficiary, you have the right to withdraw this amount from the trust for a period of 30 days from the date of this letter. To exercise this right, please notify the trustee, [Trustee Name], in writing at [Trustee Address].
Please note that while you have the legal right to withdraw these funds, it is generally expected that you will not exercise this right, as the long-term purpose of the trust is to provide for your future needs. This letter is merely to inform you of your right, not to encourage withdrawal.
Sincerely,
[Trustee Name], Trustee -
Sample 4: Letter with Detailed Withdrawal Instructions
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
This letter serves as notification that [Grantor Name] has contributed [Dollar Amount] to the [Trust Name] for your benefit. You have a 30-day window from the date of this letter to withdraw these funds. If you wish to do so, you must submit a written request to [Trustee Name], the trustee, at [Trustee Address]. Your request should include your full name, date of birth, the exact amount you wish to withdraw (up to [Dollar Amount]), and your signature. The trustee will then process your request and disburse the funds accordingly.
Sincerely,
[Trustee Name], Trustee -
Sample 5: Letter for Multiple Beneficiaries
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
I am writing to inform you that [Grantor Name] has made a contribution to the [Trust Name], which benefits you and other beneficiaries. Your share of this contribution is [Dollar Amount]. You have the right to withdraw this amount from the trust for 30 days from the date of this letter. To exercise this right, please notify the trustee, [Trustee Name], in writing at [Trustee Address].
Sincerely,
[Trustee Name], Trustee -
Sample 6: Letter Addressing Potential Gift Splitting
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
This letter is to inform you that a gift of [Dollar Amount] has been made to the [Trust Name] trust for your benefit. The gift was made by [Grantor Name]. Please note that this gift may be considered as split between [Grantor Name] and their spouse for gift tax purposes. You have the right to withdraw this amount from the trust for a period of thirty (30) days from the date of this letter. To exercise this right, please notify the trustee, [Trustee Name], in writing at [Trustee Address].
Sincerely,
[Trustee Name], Trustee -
Sample 7: Letter with Reference to Trust Document
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
In accordance with the terms of the [Trust Name] trust agreement, dated [Date of Trust Agreement], I am writing to inform you that [Grantor Name] has made a contribution of [Dollar Amount] to the trust for your benefit. As outlined in Section [Section Number] of the trust agreement, you have the right to withdraw this amount from the trust for a period of thirty (30) days from the date of this letter. Please notify the trustee, [Trustee Name], in writing at [Trustee Address] if you wish to exercise this right.
Sincerely,
[Trustee Name], Trustee -
Sample 8: Acknowledgment Request
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
I am writing to inform you that a gift of [Dollar Amount] has been made to the [Trust Name] on your behalf. You have the right to withdraw this amount from the trust for a period of 30 days from the date of this letter. To exercise this right, please notify the trustee, [Trustee Name], in writing at [Trustee Address].
Please sign and return the enclosed acknowledgment to confirm receipt of this notification.
Sincerely,
[Trustee Name], TrusteeAcknowledgment:
I, [Beneficiary Name], acknowledge receipt of this notification on [Date].
_____________________________
Signature -
Sample 9: Specific Language About How Withdrawals are Handled if Not Acted Upon
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
We are pleased to inform you that [Grantor Name] has made a gift of [Dollar Amount] to the [Trust Name] trust for your benefit. As a beneficiary, you possess a 30-day withdrawal right, commencing from the date of this letter. If you wish to withdraw these funds, you must notify [Trustee Name], the trustee, in writing, at [Trustee Address].
Should you not exercise your withdrawal right within this 30-day period, the funds will remain within the trust and be managed according to the terms outlined in the trust document for your future benefit. The lack of withdrawal will not negatively affect the trust’s standing or tax benefits.
Sincerely,
[Trustee Name], Trustee -
Sample 10: Adding Language About the Purpose of the Trust
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
This letter is to inform you that [Grantor Name] has made a gift of [Dollar Amount] to the [Trust Name] trust on your behalf. As you know, this trust was established to provide for your education and future well-being. You have a 30-day right to withdraw this amount, starting from the date of this letter, and if you wish to do so, please notify [Trustee Name], in writing at [Trustee Address]. Remember that failing to do so within the window will simply result in the funds being held in trust.
Sincerely,
[Trustee Name], Trustee -
Sample 11: Including Language About Consultation
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
I’m writing to let you know that [Grantor Name] has gifted [Dollar Amount] to the [Trust Name] for your benefit. You have the right to withdraw it for the next 30 days. To do so, please inform the trustee, [Trustee Name] at [Trustee Address] in writing. Remember that once this withdrawal window passes, the funds will be kept in the trust as is. You should consult your own financial advisor or attorney about how to best manage your finances.
Sincerely,
[Trustee Name], Trustee -
Sample 12: More Complex Instructions
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
This letter is to inform you that [Grantor Name] has made a gift of [Dollar Amount] to the [Trust Name] trust for your benefit. Under the terms of the trust, you have the immediate right to withdraw the sum of [Dollar Amount] from the trust. You may exercise your right of withdrawal within thirty (30) days following the date of this letter. To effectuate a withdrawal, please send written notice to the Trustee at [Trustee Address]. The notice should specify the amount you wish to withdraw, up to the full amount. If you fail to provide written notice within 30 days, your right to withdraw the funds will lapse, and the funds will continue to be held in trust and administered according to the trust agreement.
Sincerely,
[Trustee Name], Trustee -
Sample 13: Regarding the Trust’s Management
[Date]
[Beneficiary Name]
[Beneficiary Address]Dear [Beneficiary Name],
I am writing to inform you that a gift has been made to the [Trust Name] for your benefit by [Grantor Name], in the amount of [Dollar Amount]. As the beneficiary of this trust, you have the right to withdraw this amount for a period of thirty (30) days from the date of this letter. To exercise your withdrawal right, please send a written request to me, the Trustee, at the following address: [Trustee Address].
After this period, should you not choose to withdraw, the funds will remain in the trust and will be managed for your future benefit as outlined in the trust agreement. This management includes investments and distributions according to the trust’s purposes.
Sincerely,
[Trustee Name], Trustee
In conclusion, Crummey Trust letters are a vital component of ensuring that gifts to a trust qualify for the annual gift tax exclusion. These samples offer a starting point, but it is crucial to consult with an estate planning attorney to create letters tailored to your specific trust and circumstances. Proper execution and diligent record-keeping are paramount to maintaining the tax benefits of the Crummey Trust.
