A Crummey trust is a trust that takes advantage of the gift tax exclusion and also keeps money in trust by placing significant restrictions on the recipient’s right to withdraw. The trust allows a limited amount of withdrawals by the trust’s beneficiary, during a limited window each year.

In a Crummey trust, parents place gift money into a trust and give their child (or other recipient) the right to withdraw the amount of each gift for up to 30 days after each gift is made. Since the withdrawal right begins immediately after the gift is made, it is considered a present interest, thereby qualifying for the gift tax exclusion. If the child does not withdraw the gift within the 30 days period, the withdrawal right lapses and the money remains in the trust until the child reaches the designated distribution age. However, the parent must convince the child not to withdraw the money during the 30 days. If the child decides to withdraw the money, he/she can only withdraw the amount of the most recent gift, not the entire trust. The parent can eliminate all future withdrawal opportunities by ceasing to make any more gifts. The property in the trust will still remain intact and growing until it is ready to be distributed.