When engaging in the estate planning process, you have a lot of options at your disposal. So many, in fact, that it can become confusing and quickly overwhelming. Unfortunately, that’s why many people put off estate planning. But don’t let that happen to you.
You can simplify the process by first identifying what you want out of your estate plan. In this post, we want to look at some tools you can use to develop a strong estate plan to support your grandchildren, which is probably something that you want to get out of your estate plan.
How to incorporate your grandchildren into your estate plan
You love your grandchildren and want to ensure that they’re adequately provided for in your estate plan. While you could leave assets to your children in hopes that that wealth will trickle down to your grandchildren, that’s probably not the most effective option. Here are some other ways that you can support your grandchildren through your estate plan:
- Incentive trust: This is a great estate planning tool if you want to motivate your grandchildren to achieve a certain goal and protect their inheritance from being squandered away. Here, trust assets aren’t released until an identified triggering event occurs, such as graduating from college or getting married. Your options here are nearly limitless.
- Lifetime giving: The IRS allows you to give several thousands of dollars per year in gifts to an individual without facing tax consequences. That makes this a good way to directly provide for your grandchildren while giving yourself the ability to see them enjoy the wealth that you’ve handed down.
- 2503-C trust: Through this trust, meant to benefit a child who is under the age of 21, you receive certain tax benefits while still retaining control over trust assets. Those assets simply have to be used for the benefit of the child. Once the child turns 21, then the trust’s assets are distributed to them, at which time they acquire full ownership over them.
- Dynasty trust: This type of trust is structured to protect wealth long-term so that multiple generations can benefit from it. It carries a number of tax benefits, too, which can make it appealing to many estate planners.
- Will provisions: Although trusts can be extremely beneficial, you don’t need one to provide some support to your grandchildren. You can simply include them in the asset distribution scheme identified by your will, which should be an effective way to pass some wealth on to them.
- 529 plan: This investment allows you to put money aside for your grandchildren’s education expenses. Here, too, you can see some tax benefits, and it gives you a direct way to address a targeted need.
The estate planning process is customizable to suit your needs. Therefore, as you proceed with planning your estate, you should fully vet your options to ensure you’re choosing the ones that are right for you and your family. These estate planning vehicles can be nuanced, too, so make sure you have a full understanding of what each entails before fully utilizing it.
Don’t wait any longer to create your estate plan
If you haven’t created your estate plan yet, then now is the time to get to work. After all, you never know when the time will come for your assets to be distributed. When that happens, you want the process to go as smoothly as possible with your loved ones receiving the support that you intend for them.
But to get there, you need to take those first steps of educating yourself about the process and your options, that way you know what direction you want to start walking in your estate planning journey. We hope that you find our website and our other blog posts informative in that regard.