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- Title
Crummey Developments.
- Authors
McDevitt, Timothy J.
- Abstract
This article highlights the importance of life insurance in estate planning for high net-worth individuals and closely held business owners. Life insurance proceeds usually are income-tax free under Internal Revenue Code Section 101, but those proceeds are not federal estate-tax free. The Internal Revenue Service (IRS) usually ends up taking a 55-percent estate-tax bite out of those proceeds. Some practitioners have tried using Crummey powers, but the IRS does not like these. Others have tried to add additional Crummey power holders sufficient to cover the entire premium. IRS allowed, annual exclusion treatment only for the two children, while it disallowed qualification of the five grandchildren because of the remoteness of their interest in the trust. The tax court held that it was irrelevant that the grandchildren were not likely to ever receive any share of the trust, finding nevertheless that the taxpayer intended to benefit those grandchildren.
- Subjects
LIFE insurance; ESTATE planning; INTERNAL revenue law; CRUMMEY trusts; TAX courts; TAXATION
- Publication
Journal of Financial Planning, 1992, Vol 5, Issue 1, p8
- ISSN
1040-3981
- Publication type
Article