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Crummey Trusts

5x5 Power rule (Crummey)

The 5x5 Power rule is a way to provide some parameters around the access a beneficiary has to the funds in a trust. It means that in each calendar year, they have access to $5,000 or 5% of the trust assets, whichever's greater. This is in addition to the regular income payout benefit of the trust.
These next sessions cover data entry for 2 beneficiaries: one as Crummey and another as a net income beneficiary.

Crummey trust beneficiary

To set a beneficiary as a Crummey beneficiary, go to
Organizer
,
Beneficiary Info (1041)
,
Beneficiary Data
,
Beneficiary Information
, and then
[beneficiary]
. Select
Bene Info - Miscellaneous
 and then select
Beneficiary is a Crummey trust beneficiary (Grantor letter format will print for beneficiary)
.
Example
 - Assume the trust will distribute 5% as a grantor letter, that the residual 95% goes to the net income beneficiary, all as required.
  1. After setting the beneficiary as a Crummey trust beneficiary, enter 5% for distribution of income - required.
  2. Enter 100% for distribution of short-term gain - required.
  3. Enter 100% for distribution of long-term gain required.

Net income beneficiary

Example
 - Same assumptions.
  1. Enter beneficiary.
  2. Enter 95% for distribution of income - required.
  3. No gains distributions.

Distributions

Example
 - Same.
  1. Go to Organizer, Beneficiary Info, Beneficiary Data, and then Distribution Input - Totals.
  2. Enter 100% for distribution of income - required.
  3. Enter 5% for distribution of short-term gain - required.
  4. Enter 5% for distribution of long-term gain - required.

This article applies to:

  • Product: GoSystem Tax RS
  • Return type: 1041 Fiduciary
  • Subject: Allocation, Beneficiaries
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