Estate Planning Tips for Grandparents
Becoming a grandparent is something many of us look forward to with great anticipation. After all, grandparents get all the benefits of children without all the responsibilities. It also offers yet another opportunity to have an influence over the life of a child. That influence may extend to your desire to include your grandchildren as beneficiaries in your estate plan. If so, a Loveland area estate planning attorney at Zimmer Law Firm offers the following estate planning tips for grandparents.
- Avoid making promises. As a grandparent, you may get carried away and want to make promises for future gifts. For example, you might find yourself promising to cover college expenses, buy your grandchild’s first car, or pay for a wedding in the future. Because you can’t know what your own financial situation will be when your retirement years arrive, you could end up having to renege on the promise, so it is best to avoid making promises.
- Pass down your legacy along with material gifts. By incorporating legacy planning tools and strategies into your estate plan you can pass down more than just assets to your grandchildren. You can also continue to pass down your beliefs, ideals, faith, and philosophies that are an integral part of who you are and whom you hope your grandchildren will one day become.
- Take advantage of tax breaks and other incentives. Although making gifts is an altruistic endeavor, there is no reason why you shouldn’t also reap the tax benefits from the gift. Check with your estate planning attorney and tax advisor to see if you can combine your gifts to grandkids with any tax breaks or other estate planning incentives.
- Incorporate lifetime gifting into your plans. If your long-term plan is to pass down a portion of your estate to your grandchildren, why not make some of those gifts while you are still alive? Not only will you gain a tax advantage from doing so, but you will also have the pleasure of being able to watch your grandchildren enjoy the gifts you give them.
- Make use of the yearly exclusion. The yearly exclusion allows every taxpayer to make tax-free gifts valued at up to $16,000 ($32,000 for married taxpayers) as of 2022 to an unlimited number of beneficiaries. Gifts made using the yearly exclusion do not count toward the taxpayer’s lifetime limit for federal gift and estate tax purposes.
- Avoid making valuable lump sum gifts. A minor cannot inherit directly from your estate, meaning you will need to utilize a trust to protect the inheritance you leave your grandchildren if they have yet to reach adulthood. Once they become a legal adult, however, you may still wish to delay the inheritance to allow time for a beneficiary to grow and mature. Using that same trust, you can also stagger distributions of the inheritance instead of gifting a lump sum. For example, the trust terms could dictate a beneficiary receives a percentage or set amount at age 18 with increasingly larger distributions as the beneficiary ages and matures.
- Reduce the likelihood of disputes. While you may never admit it out loud, you probably have a favorite grandchild. You may be tempted to gift more to that grandchild as a result. There is certainly no law that requires you to gift to all grandchildren equally; however, absent a good reason not to, you may wish to do so to reduce the likelihood of probate disputes. Legally, the fact that you played favorites will not invalidate your Will, but it increases the chance that a beneficiary will try and find a way to have your Will declared invalid.
- Take care of yourself. Grandparents frequently become so enamored with their grandchildren that they want to give them everything. Resist the temptation as you may need your assets to live comfortably during your retirement years.
Contact a Loveland Area Estate Planning Attorney
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about estate planning for grandparents, contact an experienced Loveland area estate planning attorney at Zimmer Law Firm by calling 513-721-1513 to schedule your appointment today.