As we age, we tend to worry about our loved ones’ financial stability when we’re no longer around. This is what drives many people to engage in estate planning. But if you’re worried about your grandchildren’s financial wellbeing, then there may be steps that you can take now to ensure that they avoid some of life’s most common money struggles. Here are some of the steps that you can take:
- Lifetime gifts: One option at your disposal is giving your grandchildren gifts while you’re still alive. This is a very direct and immediate way to provide your grandchild with financial resources. A lot of people are worried that these gifts are going to be taxed, but the truth of the matter is that the federal government exempts more than $11 million from estate and gifting taxes. Just keep in mind that the exemption is cumulative, meaning that the $11 million dollars incorporates both gifts and estate assets that are passed down. Also, remember that you generally can only gift $15,000 per person per year in order to avoid taxation.
- College savings funds: Another way to provide for your grandchild’s financial future is to invest in a college savings fund. Often referred to as 529 plans, the profits made from these investments avoid taxes and remain tax free so long as they are used for educational expenses. Although that may sound pretty narrowly tailored, it’s actually quite expansive. For example, your grandchild could use the funds for room and board, tuition, books, apprentice programs, and even needed technology, such as a laptop.
- A sound estate plan: A strong estate plan can go a long way toward ensuring that your grandchildren are taken care of, too. While you can accomplish this by simply leaving assets directly to your grandchildren, you can also leave assets to your grandchildren in a more controlled fashion that ensures that your grandchildren are careful with the financial resources that you leave them.
- Utilize an incentive trust: An incentive trust is a great way to control asset distribution. Here, assets are left in a trust with periodic payments being made to the beneficiary, but the bulk of the assets aren’t paid out until certain conditions are met. For example, you could place a condition on the trust that your grandchild graduate college or hold full-time employment for a specified period of time before trust assets are disbursed. You could even require that your grandchild get married or have children of his or her own before trust assets are fully released.
- Ensure that your plan is up-to-date: When you’re engaging in estate planning, you also need to ensure that you’re periodically revisiting your plan to accommodate changed circumstances. Deaths, births, divorces, and changed family dynamics can all justify an estate plan modification. Failing to revisit your estate plan could leave your grandchildren susceptible to being left out of your estate distribution.
Seek out the help that you need
We know that estate planning can seem complex, especially to those who are unfamiliar with the process and the intricate steps that are often necessary to ensure that their goals are met. But that’s why competent estate planning attorneys like those at our team stand ready to help. So, if you’d like to learn more about what you can do to protect your interests and your grandchildren’s future, then now may be the time to be proactive in learning about and acting on your options.