You’ve given your children every advantage, and they’ve become successful, independent adults. So as you’re establishing your estate plan, you decide to focus on responsibly sharing your wealth with your grandchildren.
There are numerous ways to do that, but trusts are among the most popular. By establishing an individual trust for each grandchild, you can set parameters like when they’ll get the money and how much.
Your options are vast
Some trusts are established so that assets are distributed when a grandchild or other beneficiary reaches particular age milestones so that they’re not getting a significant amount of wealth all at once and are mature enough to handle the money. Others are set up so that the asset distribution is based on milestones, like graduating from college.
Trusts are often set up to reward things the grantor values – like education, starting a business or even getting married. However, you have to be careful not to set conditions that will invalidate a trust.
For example, you can’t require that a grandchild marries a person of the same race or religion. You can’t require them to convert to or stay in a particular religion. You can’t stipulate that they must divorce their spouse. These things are getting into what’s referred to as “dead hand” control.
There’s a lot to consider when creating a trust. For example:
- Do you want to go ahead and fund it (making it a “trust fund’)?
- Who will be the trustee?
- How detailed do you want to make the conditions?
- Do you want the trustee to have some say in how the assets are distributed?
- Do you want the trust to be revocable or irrevocable?
While a trust can be a valuable gift to leave any grandchild, there are ways to give them money for education, medical needs and more while you’re still around while avoiding gift (and other) taxes. With sound legal guidance, you can make the choices that are best for you and your family.