If you have grandchildren, you know what a joy they can be. Because you may have been stressed raising your own children, grandchildren give you the chance to relax and enjoy watching them grow. You may also wish to do something special for your grandchildren beyond buying them toys for their birthdays.
Like many grandparents in Texas, you may be thinking of how you can remember your grandchildren in your estate plan. Unfortunately, this is not always as simple as naming them as beneficiaries in your will, especially if they are minors. There are many factors to consider if your plan is to provide some financial support without burdening your grandchildren with the tax implications of your gift.
What is best?
Estate planning offers a wide array of options for remembering your grandchildren, but you will have many factors to consider. For example, whether your grandchildren are adults or minors will make a difference in how you plan for them. Minor children may have future educational needs, so you might want to think about opening a 529 plan to begin saving for college. This will mean naming a successor to take over the management of the plan in the event that you die before the children need the money.
Keep in mind that your grandchildren may have to deal with the generation skipping transfer tax, which the government levies on inheritances and gifts. To avoid this takes careful planning and learning about the estate planning products that are most efficient at protecting your loved ones from these heavy taxes.
One common tool for reducing tax burdens and maintaining control over assets is a trust. Since there are a variety of trusts available, including several specifically for grandchildren, you would be wise to discuss your situation with a skilled estate planning attorney who can guide you in making the most appropriate choice. With a trust, the assets you fund to it become the property of the trust, and so they are not subject to probate or certain taxes.
A trust may be especially appropriate if you hope to leave assets to a grandchild who has special needs. By leaving an outright inheritance, there is a chance you could jeopardize the child’s eligibility for government benefits. Instead, a trust can provide for a child’s needs while protecting the child’s eligibility for other assistance programs. Your attorney can help you with this and all aspects of creating an estate plan that will be your legacy of love for your family.