Pinnacle Estate Planning

By JASON GRAY

Pinnacle Law PLLC

For many grandparents, one of the most rewarding parts of estate planning is the opportunity to leave something meaningful to the next generation. An inheritance can help a grandchild attend college, purchase a first home, start a business, or simply begin adulthood with financial opportunities their grandparents may never have had.

But leaving money to grandchildren is not always as simple as adding their names to a will.

Age is one of the first considerations. Leaving a substantial inheritance outright to a very young beneficiary can create obvious problems. A minor generally cannot simply take control of a large inheritance and manage it independently. Some legal arrangement will be necessary to hold or manage the assets until the beneficiary is legally able to receive them. Even once a grandchild reaches adulthood, grandparents may reasonably question whether receiving a significant amount of money at 18 or 21 is the best long-term plan.

A trust provides considerably more flexibility. Rather than requiring an inheritance to be distributed immediately, assets can remain in trust and be used for the grandchild’s benefit. Funds might be available for education, health care, housing, or other needs while the grandchild is young. Additional control can be provided later as the grandchild becomes more financially mature. Some families choose particular ages for distributions, while others prefer continuing trusts that can provide protection and flexibility for much longer periods.

Grandparents should also consider what happens if a child dies before them. Suppose an estate plan leaves everything equally to three adult children, but one child dies first and leaves two children of their own. Should that deceased child’s share pass to the grandchildren? Should it instead be divided between the surviving children?

  Most people have an immediate preference once the question is asked, but an estate plan should make that preference clear rather than leaving the result to default rules or ambiguous language.

Another consideration is whether grandchildren should receive an inheritance directly from the grandparents in addition to what may eventually pass through their parents. Some grandparents want each grandchild to receive a specific gift. Others prefer leaving assets to their children and allowing the next generation to inherit later. Still others want to create education funds or multigenerational trusts intended to benefit children and grandchildren over many years. There is no single correct approach.

  Special circumstances can make planning even more important. A grandchild with a disability may require specialized trust planning to avoid unnecessarily interfering with eligibility for certain needs-based government programs. A grandchild who is financially inexperienced may benefit from additional management. Even a financially successful grandchild can encounter lawsuits, divorce, business difficulties, or other events during adulthood.

Depending on how a trust is structured and applicable law, keeping inherited assets in trust may provide protections that disappear when the assets are distributed outright.

Grandparents also sometimes want to encourage particular opportunities without attempting to control every decision. A trust might make funds available for education, purchasing a home, starting a business, or other purposes important to the family. The key is finding the right balance. Restrictions that seem sensible today may become impractical decades later, so flexibility can be just as important as protection.

Perhaps the most meaningful part of planning for grandchildren has little to do with the amount of money involved. An inheritance is often the final financial message one generation sends to another.

   Thoughtful planning allows grandparents to decide not simply how much to leave, but how that gift can provide the greatest long-term benefit.

*This article is for informational purposes only and should not be construed as legal or financial advice.