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.- After setting the beneficiary as a Crummey trust beneficiary, enter 5% for distribution of income - required.
- Enter 100% for distribution of short-term gain - required.
- Enter 100% for distribution of long-term gain required.
Net income beneficiary
Example
- Same assumptions.- Enter beneficiary.
- Enter 95% for distribution of income - required.
- No gains distributions.
Distributions
Example
- Same.- Go to Organizer, Beneficiary Info, Beneficiary Data, and then Distribution Input - Totals.
- Enter 100% for distribution of income - required.
- Enter 5% for distribution of short-term gain - required.
- Enter 5% for distribution of long-term gain - required.
