When thinking about your legacy, you may come to the conclusion that your own children have already established themselves financially and would not benefit greatly from inheriting a portion of your estate. Your grandchildren, however, may still be in education or not yet able to purchase their own home. Therefore, you may wish to leave your estate to your grandchildren, and bypass your children in doing so.
You may wonder whether this decision will be perceived as controversial, or whether it will even be possible without causing a dispute. You have the right to leave your estate to whomever you choose, however it is important that you plan your estate strategically and without errors so that your wishes can be fulfilled. The following is an overview of ways in which you can successfully leave your estate to your grandchildren.
Set up A Trust
Many people who intend to leave an estate to their grandchildren worry about whether they will use their inheritance responsibly. If they also have a large estate, they may try to avoid probate to reduce taxes. Creating trusts for grandchildren is a great way to solve both of these potential concerns.
Certain trusts can involve setting rules about when the beneficiary can gain their inheritance. For example, if you want to leave a portion of your estate to your currently teenage grandchild, you may decide that they will inherit 50% of their inheritance at age 21, and the other 50% of their inheritance at age 30. This way, the likelihood of them spending their inheritance wisely is much higher.
Engage in Gifting
If you want to reduce estate taxation, you may want to start giving away a portion of your estate during your lifetime. It’s possible to give each grandchild up to $15,000 each year as a gift without paying any estate tax. If your estate is currently large enough to be taxable upon death, gifting is a great way to reduce the size of your estate considerably.
If you are starting to plan your estate, it’s a good idea to spend time reflecting on the legacy that you would like to leave before making any decisions. When you want to take action to create your estate strategy, you should equip yourself with an understanding of the law.