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How to Include Grandchildren in Estate Plans


There are many reasons to include grandchildren in an estate plan. For one, you might be afraid that if you only leave assets to your children, they will use them all and leave nothing for your grandkids to inherit. For another, you might want your grandchildren to enjoy the fruits of their inheritance while they are still young.

Our estate planning team in the Villages has ample experience devising ways to leave assets to your grandchildren. There are several options, and we review some of the more common in this post.

Making a Bequest in Your Will

This might be the easiest method. You can leave specific assets or amounts of cash to your grandchildren. You can also leave them a percentage of your estate.

However, a bequest does not provide any tax advantages, which is often a concern. You also cannot control how your grandchildren spend the money, which might be something you worry about as well.

Gifting While Living

You can give a grandchild up to $15,000 a year while living without needing to pay federal gift tax. Couples can give double.

There are definite advantages to giving while alive. You can shrink your taxable estate, which means you can lower or sometimes avoid taxes on death. If you are relatively young, giving now also helps your grandchildren access assets when they need them without having to wait for you to pass.

Funding Educational Plans

We have written before about the advantages of giving to a 529 plan, which can be used to pay for educational expenses. You can make contributions tax free, and your beneficiary can take withdrawals tax-free for qualified expenses. Even better, you can change the beneficiary at any time.

Grandparents can give up to $15,000 a year but can also choose a lump sum of $75,000, representing five-years’ worth of giving. This is a good option if you want to see your investment grow over the years before a grandchild hits college.

Setting Up a Uniform Minors Transfer Account (UTMA)

A UTMA is a custodial account you can create for a minor grandchild. Although the grandchild owns the assets, the custodian controls the assets essentially until the grandchild reaches adulthood. Under Florida Statute §710.123, you can create a UTMA to last until your grandchild reaches age 25.

A UTMA has many advantages over unrestricted giving. You can invest and control the assets until your grandchild is an adult. However, you lose control after that point.

Creating a Trust

Grandparents can also use trusts effectively to leave gifts to their grandchildren. Depending on the trust, grandparents can reap tax savings and possibly control how their grandchildren spend the money. Some of the more common trusts we create for our clients include a Young Person’s Trust, Dynasty Trust, or Family Bank Trust.

Trusts provide flexibility missing from other options, such as UTMA accounts. Talk with an attorney to identify which option is best for you.

Call Millhorn Law Today

Providing for future generations is one of the great benefits of creating an estate plan. For help, contact the Millhorn Elder Law Planning Group today to set up a free meeting by calling 800-743-9732.


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