Overview:
Often times, people ask about “setting up a trust” for their child’s education. More often than not, they are talking about setting up what has come to be known as a Crummey Trust.The Crummey Trust, named after the first family to set one up, allows parents to transfer large amounts of wealth into a tightly controlled trust. This trust account can be used for education, but is not limited to that purpose.
One of the main advantages for parents is the generous age restrictions on these trusts. They can be set up so that kids do not have access to the money until their late twenties or early thirties.
Crummey trusts are subject to significant setup and upkeep costs, as well as higher levels of taxation. This generally makes them unattractive for the vast majority of families.
Ideal Investor:
A Crummey Trust is ideal for parents or grandparents who have some combination of the following factors:- They would like to gift very large amounts of money to their children.
- They have a large estate and wish to reduce their estate tax exposure.
- They have maxed out their other college savings options and want to save more.
- They do not trust their children to manage the money as young adults.
- Their children are already in a high tax bracket due to other income.
- They would like their children’s college fund to own alternative investments, real estate, and business interests.
