If you are the beneficiary of a trust, and you just received a special “notice” from the trustee, you probably have questions. Sometimes, trustees have to send beneficiaries a “Crummey Notice” or “Notice of Withdrawal Rights” to make them aware of their ability to withdraw trust money.
What Is a Crummey Notice?
When someone creates an irrevocable trust, he or she loses control over all assets placed in it. Often, though, a trust creator (also called a settlor) wants to add more money to the trust after it is initially funded. The creator can reduce her taxable estate as a whole without paying taxes on the contribution if she gives up to $15,000 a year to the trust. This amount will be exempt from federal gift taxes as long as the beneficiaries have the right to withdraw part of the contribution.
To alert the beneficiaries that (1) the trust creator has made a gift and (2) they have a short time to withdraw some of the money if they wish, the trustee must send beneficiaries a “Crummey notice” or “Notice of Withdrawal Rights”. The name “Crummey” comes from a legal case about beneficiaries’ withdrawal rights.
In the Crummey notice, the trustee should inform you what the trust creator has done – usually, placing more money in the trust). Then, the notice should say what you can do as a result. It should explain how much money you can withdraw and when your deadline is to request a withdrawal.
Do You Need to Take Any Action If You Receive This Notice?
If you do not wish to withdraw money from the trust, you do not need to do anything when you receive a Crummey notice. The money that the trust creator gifted to the trust will simply increase the trust’s principal. The trustee should be investing that money for your benefit over time. If the trustee sends you regular distributions from the trust, you should continue to receive them. If you receive only discretionary distributions, you can ask for one regardless of whether you receive a Crummey notice.
What If You Want to Make a Withdrawal?
If you want to make a withdrawal from the amount that the trust creator just contributed to the trust, contact the trustee as soon as possible. Make sure that you know how much you want to withdraw and double check that you make the request before the deadline indicated in the Crummey notice. The trustee should pay you the amount you request.
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