An Arizona Irrevocable Life Insurance Trust (IIT) is a legally binding arrangement that allows individuals to preserve their life insurance policies within a trust, providing various benefits for both the granter and beneficiaries. A unique feature of this trust is the inclusion of what is known as the Crummy Right of Withdrawal, which grants beneficiaries the ability to withdraw contributions made to the trust for a set period, usually 30 days. This right is named after the Crummy v. Commissioner court case, which established its legality. The beneficiaries of an Arizona IIT enjoy several advantages due to the Crummy Right of Withdrawal. Firstly, it allows them to receive funds from the trust without triggering gift taxes. By giving beneficiaries the option to withdraw trust contributions during this limited period, it creates the necessary illusion of ownership, turning the gifts into present interests. Consequently, this satisfies the requirements set forth by the Internal Revenue Service (IRS) for gift tax exclusion. There are various types of Arizona Irrevocable Life Insurance Trusts that incorporate the Crummy Right of Withdrawal, serving different purposes based on the individual's specific needs and objectives: 1. Traditional Arizona IIT: This is the standard and most common form of an IIT in Arizona. It involves the transfer of life insurance policies into an irrevocable trust, taking advantage of the Crummy Right of Withdrawal to maintain gift tax exemptions while preserving the policy's value for the beneficiaries. 2. Dynasty Arizona IIT: A dynasty IIT is designed with the intention of preserving wealth for multiple generations, avoiding estate taxes over the long term. By utilizing the Crummy Right of Withdrawal, beneficiaries can withdraw contributions and potentially utilize them for various financial needs while keeping the remaining trust assets intact. 3. IIT with a Granter Retained Annuity Trust (GREAT): This variation of the Arizona IIT combines the benefits of both trusts and aids in estate planning. A GREAT allows the granter to receive an annuity payment for a predetermined term, while the remainder goes to the trust beneficiaries. Including the Crummy Right of Withdrawal in this setup provides additional flexibility, as beneficiaries can exercise this right and withdraw funds during the specified period. Overall, an Arizona Irrevocable Life Insurance Trust with the Crummy Right of Withdrawal is an effective estate planning tool, offering tax benefits and control over the distribution of life insurance proceeds. By tailoring the trust to an individual's specific circumstances, one can ensure the smooth transfer of assets while minimizing tax burdens on their loved ones.