The sheer pleasure grandparents derive from quality time spent with their grandkids is truly incomparable. A conversation with a grandparent often unfurls into a vivid show-and-tell of their beloved grandkids, painting images of enchanting trips to the zoo or serene days by the lakeside. Those heartwarming moments of strolling hand in hand to a favored fishing spot, pausing to skip stones and whistle a familiar tune, are evocative of scenes from the Andy Griffith Show.
However, have you pondered what you’ll leave your grandchildren apart from these fleeting memories once you’ve passed on? Many grandparents harbor a desire to bolster their grandkids financially. If you wish to do so, it’s essential to be crystal clear in your intentions. Bequeathing assets to your “grandchildren” may be deemed ambiguous, as your children might have more offspring after your departure. You need to decide if you want to benefit only those grandchildren whom you personally knew during your lifetime. An alternative option is to establish a “pot trust,” a fund earmarked to be divided at a predetermined time. For example, the trust’s assets could be distributed among your grandchildren when your youngest child reaches 50. There’s no one-size-fits-all approach here; the vital element is to ensure your wishes are distinctly communicated, preventing a legacy of confusion.
Making financial gifts during your lifetime could be a judicious strategy, especially if your estate is substantial. As of 2023, you and your spouse can each gift $17,000 annually to each grandchild without reducing the estate tax-free amount you can pass on after death. For instance, if you have five grandchildren, you and your spouse can collectively gift a significant $170,000 every year—calculated as 5 x 2 x $17,000. However, if your grandchildren are too young or not financially disciplined, it might not be sensible to transfer such considerable amounts directly to them. In this scenario, setting up an irrevocable trust for your grandchildren’s benefit can be a sensible route.
Your grandchildren are your treasure, and there are numerous ways to show them their importance to you, from heartfelt cards and warm hugs to generous financial gifts. If you’re considering financially supporting them, consulting with an experienced estate planning attorney could help you develop a strategy that ensures their prosperous future.
From the desk of Attorney Brandon McGee
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