We are currently offering consultations via in-office appointment, phone, and video. Please contact us if you have any questions. Thank you!

typing on keyboard

How to Use a Crummey Trust to Ensure Your Beneficiaries Receive Your Gift

Planning your estate is hard work, especially because it requires a lot of long-term planning. IRA trusts, retirement vehicles, and other methods of organizing your estate for your beneficiaries need time to fall into place. But without that preparation, a large portion of your estate can disappear through the estate tax, outstanding medical debts, and more. Here's how a Crummey Trust can help:

1. Start giving money to your beneficiaries without a tax burden for anyone.

If people don't have a financial strategy in mind when they receive money, that increases the odds the recipient will simply spend the money. Gifts of up to $15,000 can pass from your hands to theirs tax-free, but that doesn't guarantee the money won't disappear or, even if they save it, hurt their own financial strategies. But when the money is in a Crummey Trust, it sits and gains interest without taxing either party.

2. Use the trusts to test who your heirs should be.

If your goal is to create legacy wealth, that goal requires a great deal of partnership and trust between you and your main beneficiary or executor. Set up Crummey Trusts as stress tests to see which of your beneficiaries has the financial discipline and acumen to handle your estate. Annual gifts to a Crummey Trust can be withdrawn by the recipient during the first thirty days following the transaction, and anyone who can't leave the money to grow may not be a good choice.

3. Remove the money from what creditors can touch.

If you have outstanding debts, creditors can pull from your unprotected estate to pay them before your beneficiaries receive any benefits. No matter what savings or wealth-building strategies you've employed, there's always a risk of taking on medical debts near the end of your life. But when you have already given some of your estate away through properly protected trusts, that money can't be taken away from your beneficiaries.

Setting up trusts alone is a risky business. Contact our team at The Law Offices of James C. Shields to make sure your trusts offer your estate ironclad protections.