Grandparents have the best of all worlds. They get to enjoy spending time with their grandchildren without all the responsibilities of caring for them day to day. If you are a grandparent, however, you may choose to contribute financially to your grandchildren’s care while you are alive. You may also want to make gifts to your grandchildren in your estate plan. The Vero Beach living trusts attorneys at Kulas & Crawford explain why you might want to use a living trust to make gifts to your grandchildren.
Why a Last Will and Testament May Not Be the Best Option
Like most people, you probably executed a Last Will and Testament when you initially created an estate plan. That Will may continue to serve as the foundation of your estate plan today; however, it may not be the best option for making gifts to your grandchildren. One reason is that a minor child cannot legally inherit directly from your estate. As such, your young grandchildren cannot receive gifts made directly from your Will. For many people in your position, a living trust is the solution.
Trusts have become a very popular addition to the average estate plan in recent decades. Although there are a number of specialized trusts that can help you achieve specific estate planning goals, all trusts start out with the same basic elements, including:
- Settlor – the person who creates the trust. A Settlor may also be referred to as the Grantor or Maker of the trust.
- Trustee – an individual or entity that administers the trust terms as well as manages and invests the trust assets.
- Beneficiary – a beneficiary is the person, entity, or even family pet that receives the benefit of the trust assets.
- Terms – created by the Settlor and may be anything that is not illegal or unconscionable.
- Funding – almost anything of value can be used to a fund a trust, including cash, securities, and real property.
Why Is a Living Trust a Wise Choice for Gifting to Grandchildren?
There are several reasons why a living choice is often a preferable method for making gifts to grandchildren. It is possible that all your grandchildren will not even be born at the time of your death. If born, they may not all be old enough to inherit directly from your estate at the time of your death. Finally, even if they are legally old enough to inherit directly, you may not want them to receive a significant lump sum until they reach a specific age and/or level of maturity. A trust provides the flexibility you need to account for all of these potential roadblocks to direct gifting.
In addition, using a living trust to hold assets intended for your grandchildren you are able to appoint someone of your choosing as the Trustee of the trust. The Trustee is responsible for protecting and managing the trust assets for the duration of the trust. By contrast, assets left to your grandchildren in your Will would also need someone to manage them until your grandchildren reach the age of majority; however, you would have no say in who that person is. Furthermore, as the Settlor of the trust you are able to create trust terms that direct a staggered distribution of trust funds instead of a lump sum when your grandchildren are old enough to inherit directly. Staggering an inheritance is usually wise when a beneficiary is relatively young an inexperienced with money. You can also use those trust terms to retain a certain amount of control, if you so choose, over how the trust assets are used by your grandchildren. For example, if education is important to you, you could create trust terms that only allow the trust assets to be used to pay for educational expenses. Finally, one of the most important benefits of using any type of trust to distribute estate assets is that trust assets do not go through probate. Consequently, your beneficiaries – including your grandchildren — can access the assets gifted to them immediately following your death instead of having to wait until the end of the probate process which can take months, or even years, to terminate.
Contact Vero Beach Living Trusts Attorneys
To learn more, please join us for an upcoming FREE seminar. If you have additional questions or concerns about gifting to grandchildren, please contact the experienced Vero Beach living trusts attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.