You are an advisor for client (client). Client has been making transfers to an irrevocable life insurance trust (ILIT) for the past 10 years. Client has been taking annual exclusions for each of the beneficiaries of the ILIT. When preparing the current year income tax return for the trust (FORM 1041), you mention that Client will need to send a notice (Crummey Letter) to each of the beneficiaries in order to receive the annual exclusion. Client seems unaware of what a Crummey Letter is, but thanks you for informing Client of this requirement and says that it will not be a problem, and the Client will prepare the Crummey letters and send them immediately. At this point in time you should:

1. Ask client if they have sent Crummey letters in the past because it kind of seems like they have not, which would be a big problem since client has been taking annual exclusions for years
2. Not ask client if they have sent Crummey letters in the past and not press the issue any further because it is not your responsibility to do investigative work for past years which you did not work on, but it would be your responsibility once you had affirmative knowledge of this past neglect.
3. Not mention anything further about Crummey Letters to Client, but tell your supervisor that there is a serious problem and let them deal with it.
4. Not mention anything further about Crummey Letters to Client, but suggest to your supervisor that you drop this client to avoid potential liability
5. Call the IRS and report client as having failed to file Crummey Letters for many past years.