Many times, grandparents come to our law firm looking for a way they can help their grandchildren. The vast majority of our clients are not rich people, they are normal people who have worked hard for their whole lives and want to make sure that their families are protected when they pass away. For many grandparents, this means including their grandchild in their estate plan in some way.
How can you include your grandchildren in your plan?
There are many ways to accomplish this:
- Set aside a particular asset for your grandkids. For example, you might own a rental home, have some stock in an investment account, or have a particular asset that you would want to give to your grandchildren when you pass away.
- Set aside a specific amount from the sale of your home for your grandkids. For many people, their home is their biggest asset. This is especially the case in recent years when home prices have skyrocketed and many people were fortunate enough to have purchased their home many years ago. This results in a sizeable amount of equity. You can use your estate plan to direct that say 20% of the proceeds from your home can be divided among each of your grandchildren. You would then be able to leave the other 80% to your kids, your grandkids’ parents, or whomever else you designate.
What can the money be used for?
Leaving money to your grandkids raises an important question though, what can they use it for? You might be worried that your grandkids are too young or financial irresponsible to hand an inheritance. That’s where a trust comes in. You can put rules in your Trust for how your grandkids’ inheritance is used. Here are some examples of things you can specify that the money has to be used for:
- For college or trade school
- For starting a new business
- Toward a down payment on a home
- Toward a wedding
- Toward a trip to your favorite vacation spot
- Kept in an account until your grandchild reaches the age of 25 and then they can have the money for whatever they want
- There are so many options, this short list does not even scratch the surface.
What else do you need to know?
These are some other important things to remember:
- Having a trust in place allows for someone you have chosen in advance to be the steward over this money until your grandchild reaches a responsible age or for a specific purpose that you have designated.
- No amount is too small. We have seen people leave $5,000 for their grandchild and certainly, you can leave more or less than that if you want. Leaving them something, though is a special way to let your grandchild know how much they mean to you and how much you care about them.
- Trusts avoid probate when they are properly funded. It’s important to talk to an attorney to make sure that your Trust is set up properly.
If you are interested in learning more about how to include your grandchild in your estate plan, please schedule a time for us to connect.