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When Should You Consider Using a Crummey Trust?

Estate planning goes hand in hand with retirement planning. As you start to set up financial structures that will last you through the rest of your life, that's the perfect time to start structuring your wealth for your beneficiaries. Don't just stick to IRA trusts or sticking your beneficiaries with a hefty estate tax bill. Use a Crummey Trust to finetune your strategy.

1. IRA trusts are too limited for your wealth strategy.

You can only contribute so much to a Traditional IRA each year, and that indirectly limits how much will remain in a trust for your beneficiary's use. At the same time, Roth IRAs — and the numerous backdoor entrances to their benefits — might not be available if your income level is too high. But a Crummey Trust operates through the $15,000 gift tax limit, not a capped retirement strategy.

2. You want a slow release of financial independence for the recipient.

Crummey Trusts also don't have to accumulate interest until your beneficiary receives your holdings. Instead, you can set release periods and holds until the recipient reaches a certain age; even better, you can pick the age instead of handing over control once the recipient turns eighteen. The amount you add to the trust can be accessed in the first thirty or sixty days after you deposit it, but it's locked in place after that. Use this to gauge the recipient's financial discipline.

3. Strike a balance between an immediate gift and long-term benefits.

People, typically in a parent-child relationship, are allowed to freely give money up to $15,000. If you want to arrange your finances to be a middle ground between an uncontrolled windfall and a valuable investment tool, a Crummey Trust certainly does the job.

Contact our team at the Law Offices of James C. Shields to start implementing your financial strategies and getting your accounts ready to maintain legacy wealth.

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