If you’re interested in setting up your estate plan in a way that passes your assets directly to your grandchildren, we recommend working with an estate planning attorney to create a generation-skipping trust. We often assume that people will pass their assets to their children, but there are various reasons and benefits to passing assets directly to their grandchildren instead.
While most people create generation-skipping trusts for their biological grandchildren, technically anyone (except a spouse or an ex-spouse) who is at least 37 ½ years younger than you can be designated as the beneficiary. These types of trusts can be complicated to set up, so we recommend consulting with an experienced estate planning attorney who can help.
Why do people use generation-skipping trusts?
- Minimize estate taxes. In order to avoid incurring federal estate taxes and certain state taxes twice – once when the assets are passed to their children and again when the children pass the assets to their children – some people opt to transfer their assets directly to their grandchildren.
- Your children can still earn an income from money generated by the trust. When you set up a generation-skipping trust, your children won’t be able to touch any of the assets included in the trust. However, they are able to earn an income from it.
- You can take advantage of the Generation-Skipping Transfer tax. Consult with your estate planning attorney about the current exemption amount, and they can help you structure a transfer of assets in a way that falls under the amount.
Estate planning is something that’s easy to put off until it’s too late. However, in order to best protect your assets and your family, we strongly recommend creating an estate plan to ensure your wishes are carried out when you are no longer here. Don’t wait until you have an accident or an illness to think about your family’s future. Creating an airtight plan will also help to avoid nasty estate litigation between family members.
If you’d like more information about how to set up a generation-skipping trust, please contact our team of estate planning attorneys at: https://www.scclegal.com/