What is a Crummey trust?
Many people wish to make lifetime gifts to their children in order to save estate taxes. As long as a parent gives his child no more than $12,000 per year, the gifts will be entirely excluded from gift or estate taxes. (That $12,000 limit increases regularly with inflation.) The problem with gifts so large is that children do not have the legal capacity, or in many cases the maturity, necessary to handle so much money. You can solve the issue of legal capacity by appointing yourself as custodian of the funds you have given your child (such as by making the gift subject to the Ohio Transfers to Minors Act), but under a custodial arrangement, the child obtains access to all of the money upon turning 21. To many parents, this is still too young. To keep the money out of a child’s hands until he is, say, 28 years old, you must set up a formal trust. You would then make your gifts to the trust, and the trustee would invest the money.
Please remember that this answer is provided in the spirit of public education, not as legal advice. If you require legal advice for a particular situation, you should consult an attorney. Many people wish to make lifetime gifts to their children in order to save estate taxes. As long as a parent gives his child no more than $12,000 per year, the gifts will be entirely excluded from gift or estate taxes. (That $12,000 limit increases regularly with inflation.) The problem with gifts so large is that children do not have the legal capacity, or in many cases the maturity, necessary to handle so much money. You can solve the issue of legal capacity by appointing yourself as custodian of the funds you have given your child (such as by making the gift subject to the Uniform Transfers to Minors Act), but under a custodial arrangement, the child obtains access to all of the money upon turning 21, or in some states 18. To many parents, this is still too young. To keep the money out of a child’
