Does putting a large amount of your investments in a trust seem like too large of a commitment all at once? Are you comfortable giving investments and cash annually to your children without controlling how the money is utilized? Are you worried about losing control of your assets by putting them in a trust? Is […]
Why should I care about investing in Japan? That sounds risky! What is shareholder activism? How is the opportunity in Japan like Private Equity in the U.S. in the 1980’s? “I am delighted to have Berkshire Hathaway participate in the future of Japan.” – Warren Buffett I made my first investment in a Japanese stock […]
What investments do you own that have performed strongly from 3/8/2023 to 3/17/2023 as banking fears have impacted financial markets? Is the high volatility and poor performance of your portfolio creating possible cognitive misjudgment errors or are you looking for possible opportunities due to your portfolio’s resiliency? As you worry about your deposits in the […]
Do you know the true cost of holding excess cash in your business bank accounts? Would additional capital be helpful to fund your business growth while taking less risk? How many more team members could you hire (or not fire) if you earned more interest on your cash? Does your bank salesperson have any incentive […]
As of September 30, 2022, the current year is the worst start for bonds since 1926 as the overall U.S. bond market is down nearly 15%. While this is disappointing, it also creates a unique, once in a generation, tax loss harvesting opportunity. This strategy can reduce current and future taxes. Tax loss harvesting is […]
Do you have high, excess cash in your business cash account earning close to 0% interest while inflation is recently greater than 6%? Do you find traditional alternatives such as CDs or money market accounts similarly unattractive given interest rates 1% to 2% and long commitment periods greater than 1 year? Do you understand your […]
Which investment solutions that you own will perform well in an inflationary environment? At Essential Partners, we build portfolios for all types of economic environments, including rising inflation. Despite inflation being littered across the news and social media daily, the past 40 years have conditioned individual and institutional investors to not worry about inflation. This […]
What is your compass to traverse global financial markets and how does that translate to your portfolio? Do you own investments that perform well in all four economic environments? There are two core marcroeconomic variables that drive financial market changes; GROWTH and INFLATION. Consider a simple micro example as it relates to equities/stocks: Sales growth […]
Have you considered the mindset and thought process differences between operating a business for personal cash flow vs. earning an investment return? Have you performed a comprehensive financial forecast for you and your family considering your financial situation post-sale? Do you understand your investment options and a range of investment returns? Is your nest egg […]
Do you know that in 2 of the last 5 decades, stocks produced negative real returns vs. cash? What assets do you own that perform best in the decades when stocks perform worst? Do you own any assets that will perform well when inflation is high but economic growth is low? “Gold is money, […]
Investment portfolios that are balanced to various economic and inflationary environments will at times contain certain holdings with unrealized capital losses. Tax loss harvesting is a tactical portfolio strategy to sell these holdings to capture the capital losses, which can then be used to offset the capital gains realized elsewhere in the portfolio. Further, the […]
Do you know the true cost of your investment holdings? Does your salesperson/broker receive commissions? Does your salesperson’s firm capture any special distribution or marketing fees at your expense? Does your salesperson have sufficient training? Does your “robo-advisor” force you to hold too much cash? Warren Buffett’s partner Charlie Munger is famously outspoken regarding the […]
Do you have a disciplined process and documentation for your investment strategy? Does your salesperson/broker provide an Investment Policy Statement to set clear investment objectives, guidelines, and expectations? “Successful investment takes time, discipline and patience.” – Warren Buffett In our experience, no serious pension or endowment would invest without first creating an Investment Policy Statement. […]
Will your salesperson/financial advisor analyze investments they do not bring to you where they cannot earn fees or commissions? Has your salesperson/financial advisor ever thought your investment idea was a great idea if it meant you would be pulling the money from their control and fee structure? Has your investment advisor ever analyzed a company’s […]
- Does putting a large amount of your investments in a trust seem like too large of a commitment all at once?
- Are you comfortable giving investments and cash annually to your children without controlling how the money is utilized?
- Are you worried about losing control of your assets by putting them in a trust?
- Is annual gifting big enough to matter?
Thoughtful trust & estate planning is a worthwhile effort, which we help our client partners navigate. For large estates that are trying to reduce their estate taxes for their heirs, planning can entail large and permanent financial decisions about your assets. These decisions can be stressful and complex.
Annual gifting also removes assets from your estate and can be a more gradual, comfortable approach. However, if you are annually gifting cash or investments to children, is there a way to maintain control consistent with your broader estate planning wishes?
A Crummey trust is a type of trust that is used to make annual gifts to beneficiaries while taking advantage of the annual gift tax exclusion. The trust is named after a court case in 1968, Crummey v. Commissioner, in which the court ruled that a trust beneficiary has a present interest in the trust property if they have the right to withdraw the property within a certain period of time (usually 30-60 days). The beneficiary does not have to actually withdraw the property, yet this qualifies the gift for the annual gift tax exclusion. Problem solved.
In practice, this can lead to substantial estate tax savings while maintaining control. For example, a married couple with 3 children can contribute $17,000 per child, per spouse, based on the current gift tax exclusion. This results in $102,000 in annual gifting to remove these assets from the taxable estate. On the surface, I can see how this does not seem material if a family has a large estate they are attempting to protect from taxes.
However, if these gifts are made annually over 30 years and invested at a 7% annual return, the result would be $9.6 million removed from the government’s tax reach. This strategy could save $3.85 million in estate taxes at the current 40% tax rate. This strategy is material for even the largest estates.
It's important to note that there are other requirements for Crummey trusts, such as providing written notice of the withdrawal right to the beneficiaries and carefully documenting the process. We help our client partners coordinate these activities with our trust & estate attorney network.
Investment advisory services offered through Essential Partners, an SEC registered investment advisor. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. Investing in financial markets