PARENTS & HOMEOWNERS: MY 7-STEP ESTATE PLANNING PROCESS WILL PROTECT YOUR HEIRS
From Creditors, Predators & Bad Choices, And Will Help You Become a (Bigger) Hero to Your Family!
Can I Skip Over My Children and Leave Assets to My Grandchildren Instead?
It is a common question that pops up during estate planning. Grandparents want to know if it’s irresponsible, rude, or just “wrong” of them to leave their assets to their grandchildren rather than to their children. This may be because they feel their children won’t responsibly handle the assets upon their death. Another reason could be that grandparents want the ability to leave their grandchildren in a better state financially than they were able to provide for their own children when they were younger. It’s also possible that the children are already financially stable and can care sufficiently for themselves, and grandparents want to extend financial security to their grandchildren.
Generally speaking, by leaving assets to children, it will indirectly benefit the grandchildren as well, but if you have concerns about your children’s mental health, stability, decision-making, substance abuse or other issues, you can bypass your children entirely.
What Options do I Have to Leave Assets to My Grandchildren?
One of your options is to establish a trust that will gift your assets to your grandchildren. By establishing a generation-skipping trust, you can guide how and when the recipient uses the assets. This process can help to ensure that the beneficiaries aren’t using their inheritance on financially irresponsible items, and instead, for their intended benefits, such as education or housing, once they reach a certain age. This is a great way to pass not only money, but also your values, down through the generations.
Another way to achieve this is to create a trust that names you as the trustee and transfers some assets to the trust that will ultimately land in the ownership of your grandchildren. It is important to note that you must adhere to the annual gift tax exemption to avoid your grandchildren having unnecessary tax implications.
What Problems can Occur with Leaving Assets to Grandchildren?
There are some items to note when deciding to leave assets to grandchildren. Should you pass away before the grandchild in question reaches the age of 18, they may be unable to receive assets, such as property or cash accounts, legally. It is crucial to account for this by ensuring that the executor or trustee has a strategy in place should this occur.
Understanding the tax implications that the inheritance will create for the grandchildren is essential. There are ways to proactively ensure that the gifted assets won’t be drained down to a minimal inheritance due to taxes.
It is impossible to plan for all unforeseen circumstances. It is important to design an estate plan that will protect your hard-earned assets from divorce, untrustworthy spouses, blended families, or business partners who squander their inheritance.
It is essential to speak with an experienced estate planning attorney to cover all of your bases and plan as much as you are able for unforeseen circumstances that can pop up.
Educational Planning Gifts for Grandchildren
An appropriate alternative to gifting an inheritance may be to set up an education savings plan for your grandchildren. Education planning gifts are a popular method for those that want to set aside additional funds to help bolster their grandchildren’s plans for college. Such strategies include 529 plans or Educational IRAs. A comprehensive estate plan can consist of several options to ensure that your grandchildren receive the majority of your assets rather than or in addition to your children.
Is a Will or a Trust the Best Option to Leave Assets to Grandchildren?
Only an experienced lawyer with intimate knowledge of your family and your estate can answer this question.
For example, establishing a living trust and naming yourself the trustee is a great way to maintain authority over your assets while you are still alive. You can name a successor trustee that will take over upon your death and continue with your wishes as directed in the trust. This process can be a great option to help grandchildren receive the assets you wish them to have upon death.
By working with an experienced lawyer, you can specify your wishes and detail your estate. Together, you can put a strategy that is best for your family specifically, and they can help to ensure that.
Where Do I Start?
By enlisting the help of an experienced estate planning attorney, you can alleviate your questions and work on forming a strategy that ensures all of your wishes are met. A thorough process will include reviewing your entire estate, helping you plan for the foreseeable and the unforeseen future, and going over ideas or circumstances you have yet to think of to ensure you have a comprehensive plan.
After working with clients for years to plan for the future, I am confident in our ability to assist you with your comprehensive estate plan and set up your grandchildren for success. Contact me today at (805) 244-5291 to begin the process and obtain an in-depth personal consultation from a team with the skill set and compassion to help you with your legacy.