A trust is a central component in many estate plans given that a trust offers tax advantages, asset protection, and long-term financial structure for beneficiaries. Not surprisingly, many families rely on one or more trusts to secure wealth for future generations. The beneficiaries of these trusts may occasionally receive a “Crummey Notice,” a document that often creates confusion because recipients are unsure why it was issued or whether they must respond. Understanding the purpose of this notice and your options as a beneficiary can help ensure that the trust operates properly and continues to support your financial interests. Toward that end, the Los Angeles attorneys at Schomer Law Group, APC explain the purpose of a California Crummey notice and discuss how to respond to one.
What Is a Crummey Notice?
A Crummey Notice is a written notification sent when someone contributes money to an irrevocable trust that includes withdrawal rights for beneficiaries. The notice informs you that you have a temporary right to withdraw the amount contributed for a short, defined period, usually 30 to 60 days. Once that timeframe closes, the right expires and the funds remain in the trust.
This procedure stems from the landmark case Crummey v. Commissioner in 1968. That ruling allowed contributions to qualify for the federal gift tax annual exclusion if beneficiaries were granted a present right to withdraw the funds. In 2025, the annual exclusion is $19,000 per recipient. To meet the definition of a “present interest,” the beneficiary must have immediate access to the gift. The short-term withdrawal right fulfills that requirement even if the money ultimately stays in the trust. Once the window closes, the Trustee manages the contribution according to the terms the Grantor established
Why Was a Crummey Notice Sent to You?
If the California trust in which you are a beneficiary contains Crummey powers, you will receive a notice each time the Grantor adds new contributions. The Trustee must send these notices to document that the required withdrawal rights were offered. The notice generally identifies the amount deposited, the deadline for exercising the right, and instructions for communicating with the Trustee if you choose to withdraw the funds. The central purpose of the notice is compliance. Without extending a withdrawal right and documenting that it was offered, the IRS could determine that the contribution does not qualify for the annual exclusion. That determination could create unintended tax consequences for the Grantor, so formal notice is essential.
How Should You Respond?
When you receive a Crummey Notice, you have two options: withdraw the funds or allow the withdrawal period to lapse. Before acting, consider discussing the matter with a California trust attorney, particularly if you have questions about the trust’s purpose or long-term impact. In the meantime, the following considerations can help guide your decision:
- Understanding the Trust’s Role in Long-Term Planning: Many irrevocable trusts are structured to preserve family wealth, support beneficiaries over time, or reduce tax exposure. Withdrawing funds may interfere with these goals, especially if the trust is intended to grow or to provide financial support in future years. Knowing why the trust exists and what it is intended to accomplish is important before taking any action.
- Communicating with the Trustee: If any part of the notice or trust arrangement is unclear, reach out to the Trustee. They can explain the effect of a withdrawal, outline the trust’s administration, and provide any additional documentation you need. Clear communication can prevent misunderstandings and help you decide responsibly.
- Evaluating Financial and Practical Consequences: The temporary withdrawal right exists to satisfy federal tax rules, but exercising it may reduce the trust’s ability to generate long-term benefits. If multiple beneficiaries are involved, taking a withdrawal could also create tension if others allow their rights to lapse. Reviewing both the immediate and the long-range impact can help you make a choice that aligns with your broader interests.
What Happens If You Take No Action?
Most beneficiaries opt not to withdraw funds. If you simply allow the deadline to pass, the contribution will remain in the trust and continue to be invested or distributed according to the trust instrument. Taking no action does not waive your rights as a beneficiary. Instead, it supports the objectives of the trust and strengthens its ability to provide future financial stability. For many beneficiaries, allowing the contribution to remain untouched aligns with the long-term goals of the trust structure.
Why Crummey Notices Matter
For Trustees and Grantors, proper issuance and documentation of Crummey Notices is essential. These notices help maintain eligibility for the federal gift tax exclusion and protect the trust from future tax complications. They also establish a clear record that beneficiaries were given the required withdrawal opportunity. For beneficiaries, the notices serve as a reminder that the trust is being funded and that you have defined rights with respect to those contributions. Even when no action is taken, the notice reinforces your awareness of the trust’s administration and helps ensure transparency in the process.
Do You Have Questions about a Crummey Notice in California?
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about a Crummey notice in California, contact the experienced Los Angeles estate planning attorneys at Schomer Law Group APC by calling (310) 337-7696 to schedule an appointment.
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