medium · Certified Financial Planner Risk Management
The Novak family has established an Irrevocable Life Insurance Trust (ILIT) for their children. To ensure the annual gifts to the trust qualify for the gift tax annual exclusion, they grant the beneficiaries 'Crummey' withdrawal powers.
To avoid a taxable lapse of a power of appointment, the withdrawal power should be limited to the greater of:
- $19,000 or 10% of the trust assets.
- $3,000 or 3% of the trust assets.
- $5,000 or 5% of the trust assets.
- The total amount of the gift divided by the number of beneficiaries.
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