Crummey Power: Definition and How It Works in California

By Eric Ridley, attorney, Ridley Law. Updated October 2026.

A Crummey power is a beneficiary’s temporary right to withdraw a gift made to an irrevocable trust. That right makes the gift a present interest, so it qualifies for the annual gift tax exclusion, which is $19,000 per recipient in 2026, instead of using up lifetime exemption.

How it works in California

Ridley Law’s guide to irrevocable life insurance trusts shows Crummey powers in their most common setting. The annual exclusion under 26 U.S.C. § 2503(b) applies only to gifts of present interests, and a gift into a trust is normally a future interest. The 2026 amount is $19,000 (Rev. Proc. 2025-32).

The power takes its name from Crummey v. Commissioner (9th Cir. 1968) 397 F.2d 82. The trust let each child demand a share of yearly additions, and the Ninth Circuit allowed the exclusions even for minor children, reversing the Tax Court on that point. When a beneficiary lets the power lapse, the lapse is treated as a release, and so as a gift by the beneficiary, only to the extent the amount exceeds the greater of $5,000 or 5 percent of the trust assets (26 U.S.C. § 2514(e)).

Why it matters

Crummey powers let a family fund an insurance trust or a long-term trust each year without touching the $15 million lifetime exemption. In a hypothetical, a married couple with three children, each holding a withdrawal right, can put $114,000 a year into the trust (two parents times three children times $19,000) as annual exclusion gifts, provided the trust handles the $5,000 or 5 percent lapse limit described below.

Common mistakes

Skipping the notice letters. Most planners send a written notice each time a gift is made, because a withdrawal right nobody knows about is hard to defend as a present interest. Giving each beneficiary a withdrawal right larger than $5,000 or 5 percent without a hanging power or other fix, which turns each lapse into a gift by the beneficiary. And making gifts the trust can’t hold open for the withdrawal period.

Related terms

• Dynasty Trust: annual exclusion gifts to a dynasty trust usually rely on Crummey powers.
• Spousal Lifetime Access Trust (SLAT): children named in a SLAT can hold withdrawal rights over annual gifts.
• Irrevocable Life Insurance Trust (ILIT): the trust that most often uses Crummey powers to pay premiums.

Part of the California estate planning glossary. For the full treatment, see Irrevocable Life Insurance Trust (ILIT): How It Works in California (2026).