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Crummey Trusts for Education Savings

August 24, 2011

John Jastremski Presents:

 

Crummey Trusts for Education Savings

 

Definition

A Crummey trust is a special type of trust that allows the beneficiary of the trust to withdraw the periodic contributions made to the trust for a limited period of time after they are made. This withdrawal right is known as a Crummey power.

Prerequisites 

  • None

Key Strengths

  • No mandatory distribution requirement when your child turns 21
  • Trust document can require child to use the money only for educational purposes
  • Unique Strategy: Allows multiple beneficiaries

Key Tradeoffs 

  • Trust is irrevocable once established
  • Expensive to establish and maintain the trust
  • A significant lump sum is usually appropriate to establish the trust
  • Trust income over a certain amount is taxed at a higher rate than individual income
  • Child may exercise Crummey power
  • Negative impact on your child’s eligibility for financial aid

Variations from State to State 

  • None

How Difficult Is It to Implement? 

  • Select legal professional to draft trust document
  • Transfer assets to the trust
  • File annual tax return on behalf of trust
  • Distribute assets to child when child turns 21 (or as specified in trust)

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com,  access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at http://www.theretirementgroup.com.

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