If you’re a grandparent with assets that you plan to leave to your grandchildren, it’s important to continue reading. How you plan the transfer of those assets depends on whether they’re adults or minors. In addition, grandchildren with special needs may need complete or supplementary financial support throughout their lives. You may think of contributing to that.

Would you like to pay for education as your grandchildren transition into adulthood? Some vehicles that are available to help with that are;
– 529 Plans pay for college, and you’re able to maintain control until the money is withdrawn
– A Uniform Gifts to Minors Act (UGMA) account.
– A Uniform Transfers to Minors Act (UTMA) account

Here you’ll find the difference between 529 plans, UGMA accounts and UTMA accounts.

Consider contributing to these during your lifetime as a strategic way to reduce the value of your taxable estate while still working toward education savings goals.

Successor Designations

To begin, update successor designations to stipulate who will take over managing your accounts should you pass away. Ensure your beneficiaries are up to date on assets that have provisions for naming them, such as investment and bank accounts with transfer-on-death designations.

The Importance of Trusts

If your grandchildren are still minors, you might want to ensure they’re provided for financially. Trusts will allow more control of your assets, even after your death.

  • You can state how you’ll leave money to your grandchildren, the circumstances used to distribute funds, and when the funds should be withheld.
  • You can determine whether they will gain control of the money at a certain age and whether they are co-trustees or full owners.
  • A trust gives you the ability to transfer assets while reducing estate taxes and allowing your influence on the assets.

What kinds of trusts are available?

  • Generation-skipping trusts: these allow the assets to be distributed to non-spouse beneficiaries who are two or more generations younger without incurring the generation-skipping tax.
  • Credit shelter trusts: these make full use of you and your spouse’s federal estate tax exclusion, bypassing your surviving spouse’s estate.
  • Irrevocable life insurance trusts: these purchase life insurance policies to provide immediate benefits on death that don’t usually pass through probate.

Can I leave my IRAs to my grandchildren?

Yes. You can leave any IRAs to your grandchildren, however, they will generally need to take required minimum distributions (RMDs) soon after your death, and depending on their ages may have to pay associated income taxes. So, it is important that you note any beneficiaries on retirement account forms.

Finally, keep in mind that for many grandchildren, it’s being remembered that matters more than the inheritance itself, especially if it’s paired with something sentimental for your estate. Consider this an opportunity to tell your grandchildren that they are loved, and when you’re ready to create your estate plan, call Chuck Bendig.

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