easy · Certified Financial Planner Investment Planning
The Rourke family establishes an Irrevocable Life Insurance Trust (ILIT) for their two children. To ensure that contributions qualify for the gift tax annual exclusion, they include Crummey withdrawal powers.
According to the 'five and five' rule, the lapse of these powers is not a taxable gift if the withdrawal right is limited to the greater of:
- 19,000 or 10% of the trust assets.
- 5,000 or 5% of the trust assets.
- 5,000 or 5% of the donor's gross estate.
- 10,000 or 10% of the trust assets.
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