If you are a grandparent, you know the joys only grandchildren can bring. Giving money to your grandchildren seems only natural, whether it is a crisp twenty in a birthday card or a crumpled five for ice cream. However, what about a living trust? Though deciding to secure your grandchildren’s future by leaving them your assets is a noble endeavor, you are certainly being very noble, but what you’ve set out to do may not be easy.
Due to family law, establishing a living trust for grandkids can be very complicated for the simple fact that such a trust skips a generation. Unlike entrusting your fortune to your son or daughter which is straightforward, leaving money for grandchildren requires more documentation to prove that your grandchildren are legally able to receive your funds.
Skipping generations is a bit different
When it comes to generation-skipping trusts, financial experts say that age is a big factor when leaving money to children. Leaving your trust to a baby or young child is riskier than an adult. If the grandchild is too young, a custodian will have to take charge of the trust which opens the possibility of the inheritance being mismanaged or exploited.
Another consideration would be how directly related you are to your grandchildren and how many you have. If you hope to divide your money fairly among your grandchildren, you might have to take extra legal steps to assure that. For example, will you include any step children? What about grandchildren in a divorce where your son/daughter does not have custodianship?
Finally, as with any trust or inheritance, you must think about and make allowances for unforeseen scenarios. Do you have a plan to reallocate your funds if one of your grandchildren predeceases you? In the event of your death, have you made provision for unborn grandchildren? There are legal safeguards for each of these situations, but they are lengthy and detailed. Take the time to contemplate the legal commitment a living trust entails for you. How important to you is a living trust for your grandchildren? If you know the answer and are ready to proceed, your next step is finding legal advisor.
Lower taxes are now in place
Good legal advice will be invaluable for you during the decision process of establishing a trust, especially when it comes to taxes. Taxes on generation skipping trusts can be unavoidable if your estate is substantial (upward of $5 million). In those cases, many advisors recommend to simply give your grandchildren money while you are still living since a trust will still incur taxes. However, if your estate is under that astronomical number, then giving money to your grandchildren in a will might be the better choice for several reasons such as giving your more control over what happens to your money. If you are desiring to create a trust for your grandchildren, you will need to do more research to determine what is best for you. Fortunately, resources are available such as the Jeffrey M. Verdon Law Group. Experts in tax laws and financial planning, Jeffrey M. Verdon Law Group will prioritize your wishes while protecting your assets.