If you are fortunate enough to be a grandparent, you understand the joy a grandchild brings into your life. Becoming a grandparent may also prompt you to make some changes to your estate plan if you wish to include your grandchildren in your plan. When including your grandchildren in your estate plan, the North Andover estate planning attorneys at DeBruyckere Law Offices urge you to consider the following tips:
- Make lifetime gifts. If your long-term plan is to pass down a portion of your estate to your grandchildren, make why not make some of those gifts while you are still alive? Not only will you gain a tax advantage from doing so, but you will also have the pleasure of being able to watch your grandchildren enjoy the gifts you give them.
- Don’t make promises. As a grandparent, you may get carried away and want to make promises for future gifts. For example, you might find yourself promising to cover college expenses, buy the first car, or pay for a wedding in the future. Because you can’t know what your own financial situation will be when your retirement years arrive, you could end up having to renege on the promise, so it is best to avoid making promises.
- It’s o.k. to also benefit from the gifts you make. Although making gifts is an altruistic endeavor, there is no reason why you shouldn’t also reap the tax benefits from the gift. Check with your estate planning attorney and tax advisor to see if you can combine your gifts to grandkids with any tax breaks or other estate planning incentives.
- Incorporate the yearly exclusion into your gift giving. The yearly exclusion allows every taxpayer to make tax-free gifts valued at up to $15,000 ($30,000 for married taxpayers) to an unlimited number of beneficiaries. Gifts made using the yearly exclusion do not count toward the taxpayer’s lifetime limit for federal gift and estate tax purposes.
- Keep something for yourself. Grandparents frequently become so enamored with their grandchildren that they want to give them everything. Resist the temptation as you may need your assets to live comfortably during your retirement years.
- Remember that your legacy may be the most important gift. By incorporating legacy planning tools and strategies into your estate plan you can pass down more than just assets to your grandchildren. You can also continue to pass down your beliefs, ideals, faith, and philosophies that are an integral part of who you are and who you hope your grandchildren will one day become.
- Avoid gifting a sizeable lump sum to a young adult. A minor cannot inherit directly from your estate, meaning you will need to utilize a trust to protect the inheritance you leave your grandchildren if they have yet to reach adulthood. Once they become a legal adult, however, you may still wish to delay the inheritance to allow time for a beneficiary to grow and mature. Using that same trust, you can also stagger distributions of the inheritance instead of gifting a lump sum. For example, the trust terms could dictate a beneficiary receives a percentage or set amount at age 18 with increasingly larger distributions at ages 21, 25, 30, and 35. As the Settlor (creator) of the trust, you create the terms.
- To prevent disputes avoid favoritism. While you may never admit it out loud, you probably have a favorite grandchild. You may be tempted to gift more to that grandchild as a result. There is certainly no law that requires you to gift to all grandchildren equally; however, absent a good reason not to, you may wish to do so as a way to reduce the likelihood of probate disputes. Legally, the fact that you played favorites will not invalidate your Will, but it increases the chance that a beneficiary will try and find a way to have your Will declared invalid.
Contact North Andover Estate Planning Lawyers
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about gifting to your grandchildren, contact the North Andover estate planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
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