Jeffrey M. Verdon Law Group, LLP
Ph: 949-988-0939

Using Email Instead of Snail Mail to Send Crummey Notices

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Dear Clients, Colleagues, and Friends,

If your life insurance policy is owned by an Irrevocable Life Insurance Trust (ILIT), you know what a pain it is to ask your trustee to mail the so-called Crummey letters every year to each trust beneficiary before the premiums can be made. Many of our clients complain about the inconvenience of having to go through this process, but failure to follow the formalities could result in the life insurance proceeds being subject to estate tax when the insured dies.

Outright gifts easily qualify for the $14,000 annual exclusion, but gifts to irrevocable trusts are more problematic. The gift to the trust must be a gift of a "present interest" which can only be achieved if the beneficiaries are given notice they have the right to withdraw the gift to the trust and elect on their own not to take it. This notice is called the "Crummey" notice, after the famous tax case of its namesake (Crummey v. Commissioner). And all that is required is that the beneficiary receive actual notice of his or her right to withdraw their share of the gift to the trust and that he or she is given enough time to exercise the right before it lapses (which typically is laid out in the trust provisions to be a period of 30 days from the time of notice).

In this new age of electronic mail, we believe the process of giving effective notice of the gift can be accomplished in a more streamlined fashion. The Crummey notices may be made via electronic mail, i.e., email, to each of the current beneficiaries. If your trustee elects to do this, he or she should request the beneficiary acknowledge receipt in a return e-mail. The e-mail can also be electronically filed and/or printed and stored for record keeping. Going one step further, the Trustee can utilize a program such as DocuSign, which facilitates electronic signatures on documents in a secure manner. Of course for proper drafting of the Crummey notice, an attorney should be consulted.

So if you want to remove the "crummey" from the Crummey process, have your trustee use e-mail combined with DocuSign to simplify the process. If you elect to use this process, write me and let me know if you and your trustee found this process more simplified and convenient.
Happy Holidays!

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