The tax loophole referred to as “Crummey Power” is named after Clifford Crummey who created a trust in order to transfer his assets with the intention of avoiding estate and inheritance taxes upon his demise. The Internal Revenue Service was not pleased and in 1968, took Crummey to court for what they termed as an illegal tax loophole. Crummey’s victory in court created a precedent making the trust an acceptable tool in estate planning.
WHAT ARE THE BENEFITS OF A LIFE INSURANCE TRUST?
Life Insurance Trusts have benefits while you are alive by allowing you to make premium payment through gifts to the trust. To learn more about Gift Tax, review my Estate Planning article. In 2013 and 2014, you can make up to $14,000 gift payments to the trust per beneficiary. Thereafter, the trust makes the payments for the life insurance policy or policies.
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