Understanding Crummey Trusts and How to Use Them

Establishing a trust may be on your estate planning to-do list. A trust can help you preserve your wealth for future generations while potentially enjoying some tax advantages. A Crummey trust, specifically, can be used to transfer assets to your children whether they’re minors or adults. It is a common strategy for avoiding gift taxes.

A financial advisor can help you create an estate plan for your family’s needs and goals.

Crummey Trust, Definition

The name comes from Clifford Crummey, who first came up with the idea for this type of trust. Crummey trusts allow you to make financial gifts to beneficiaries while minimizing gift tax. This type of trust is typically used by parents who want to make financial gifts to minor or adult children. However, anyone can establish one on behalf of a beneficiary.

Crummey trusts can offer an alternative way to gift money to minors instead of custodial accounts. In those types of accounts an adult controls assets until the child reaches the age of majority. Then, the assets go to them automatically. A Crummey trust offers more flexibility, and control, over when beneficiaries are allowed to tap into assets.

How a Crummey Trust Works

Crummey trusts follow unique rules for taxation and transferring assets. When you set up this type of trust, the beneficiary has a set window of time to withdraw assets. For example, within the first 30 days after you fund the trust. This withdrawal power gives them a present interest in the financial gifts included in the trust. It allows you to minimize gift taxes or avoid them entirely.

While the beneficiary could technically withdraw assets, that would be unlikely in the case of a minor child. Assuming no withdrawals occur during this period, any financial gifts you’ve made would stay in the trust. The trustee distributes assets to the beneficiary or beneficiaries according to the terms and timeline you’ve set.

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Advantages of Crummey Trusts for Estate Planning

A sticky note that reads "gift tax," on a desk next to a calculator and gift box.

The chief advantage of including a Crummey trust in your estate plan is its favorable treatment of financial gifts for tax purposes. Assuming that your beneficiary doesn’t withdraw funds from the trust during the withdrawal period, money added to the trust on their behalf would then qualify for the annual gift tax exclusion.

As of 2026, the annual gift tax exclusion limit is $19,000 per person, per taxpayer. So that means if you’re a married couple filing a joint return, you could technically gift $38,000 per child, per year, without triggering the gift tax. However, you may still need to file a gift tax return when you prepare your taxes.

The key to making this rule work for you is ensuring that your Crummey trust includes a legitimate withdrawal period in which your beneficiary can exercise his right to take money from the trust. In the case of minor children, withdrawals likely aren’t an issue if you’ve set the trust up for your kids.

With adult beneficiaries, grantors often specify that withdrawing assets during this period means they won’t receive further financial gifts. That can be an incentive to keep beneficiaries from taking out trust assets too soon.

Crummey trusts transfer wealth, but they’re also useful for college planning. For example, you could specify that the money in the trust only pay for college tuition and education expenses. Or you could specify that your child can’t access the money until they’ve completed college or reached a certain age.

In a nutshell, Crummey Trusts can give you control of trust assets and distributions to your beneficiaries, while also yielding tax benefits. Both can be helpful if you’re looking for another option beyond custodial accounts or 529 college savings accounts to plan for your child’s financial future.

Are There Any Downsides to Crummey Trusts?

If you’re thinking that a Crummey trust could be a useful addition to your estate plan, there are a few potential drawbacks to keep in mind.

First, there’s the cost of setting up and maintaining a Crummey trust. You’ll typically need to pay an attorney to help with creating the trust and the trustee can also collect a fee. The exception would be if you’re acting as the trustee yourself.

That, however, means the trust can be included in your gross taxable estate. For that reason, it may be better to appoint a disinterested third party to act as a trustee to minimize your tax liability. And finally, there’s always the possibility that your trust beneficiary will withdraw money from the trust during the withdrawal window. That would negate any gift tax exclusion benefits you might have enjoyed by leaving the money in the trust.

Crummey trusts are complicated. It may be helpful to talk through the details with an estate planning attorney. They can help you determine whether a Crummey trust could work in your favor. And, if so, what terms to set when creating the trust to make the most of any assets you’re gifting to beneficiaries.

How the Trustee Choice Affects the Trust’s Tax Treatment

One of the most consequential decisions in setting up a Crummey trust is who serves as trustee. You should understand why before assuming you’ll simply take on the role yourself.

If you control the distributions as the trustee the IRS may consider you to still hold “incidents of control.” When that happens, the trust’s assets can be pulled back into your gross taxable estate when you die. This happens even if you technically transferred them into the trust years earlier. This defeats the whole point of moving assets out of your estate to reduce tax liability. This creates a real tradeoff for grantors to weigh. Serving as trustee avoids the ongoing trustee fees you’d otherwise pay to a professional or an independent third party. But the additional estate tax owed can easily exceed any trustee fees, particularly for larger trusts.

For this reason, many estate planning attorneys recommend appointing someone with no personal stake to serve as trustee instead. Doing so helps make sure the trust actually delivers the estate tax benefits. Otherwise you may undermine them through a well-intentioned but costly decision to manage things yourself. If you’re weighing whether to serve as trustee then the upfront cost of professional help can be worth it. It directly protects the tax advantages the trust exists to create.

Bottom Line

A couple watching their children and grandchildren in a field.

Crummey trusts are just one way to manage the transfer of wealth to future generations. These trusts can offer some tax benefits. If you create one on behalf of minor children, they offer more control regarding your assets compared to a custodial account. Assessing your bigger estate planning and tax planning picture can help you decide where you should be using a Crummey trust to further your financial goals. As with any other type of trust, it’s important to consider the costs of setting up and maintaining the trust over time.

Tips for Investing

Consider working with a financial advisor about the pros and cons of Crummey trusts and trusts in general. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
In addition to a trust, you should also include other financial tools for your estate plan, such as a last will and testament or advance health care directive. Life insurance and long-term care insurance may also be something you need if you want to preserve assets for your loved ones. Together, these tools can help with shaping a comprehensive plan for managing wealth during your lifetime and after you’re gone.