Here Are Your Estate Planning Articles for Tuesday, March 02, 2021. I hope you find value in these educational articles. Regards, Joe
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Your Grandchildren and Your Estate


How you plan the transfer of assets to your grandchildren will likely depend on whether they're adults or minors. Special needs grandkids may need complete or supplementary financial support throughout their lives. As a grandparent, you may be thinking of contributing to that.

How about paying for education as grandchildren transition into adulthood? What vehicles are available to help?

  • 529 plans pay for college, and you maintain control until the money is withdrawn.
  • A Uniform Gifts to Minors Act (UGMA) account.
  • A Uniform Transfers to Minors Act (UTMA) account.

Contributing to these during your lifetime may be a strategic way to reduce the value of your taxable estate while working toward education savings goals.

To start with, update successor designations to stipulate who will take over the management of your accounts if you pass away. Ensure your beneficiaries are up to date on assets that have provisions for naming them — investment and bank accounts with transfer-on-death designations.

If your grandkids are still minors, you may want to ensure they're provided for financially. Trusts can be beneficial, allowing more control of assets, even after your death.

  • You can state how you'll leave your money to your grandchildren, the circumstances used to distribute the funds and when the funds should be withheld.
  • You can determine whether your grandchildren will be able to control the money at a certain age either as co-trustees or full owners.
  • A trust can transfer assets to an adult grandchild while reducing estate taxes and allowing your influence on the assets — even after you've passed on.

What kinds of trusts might be available when grandchildren are involved?

  • Generation-skipping trusts allow trust assets to be distributed to non-spouse beneficiaries two or more generations younger without incurring the generation-skipping tax. Usually, this affects only very wealthy families.
  • Credit shelter trusts make full use of your and your spouse's federal estate tax exclusion to benefit grandchildren, bypassing your surviving spouse's estate.
  • Irrevocable life insurance trusts purchase life insurance policies to provide immediate benefits on death that don't usually pass through probate.

You can leave any IRAs to your grandchildren, but they will generally need to take required minimum distributions (RMDs) soon after your death, depending on their ages; they'll have to pay associated income taxes. It's very important you note any beneficiaries on retirement account forms — a will typically does not supersede the beneficiary designation. Pay special attention to special needs grandchildren — you'll want to ensure they'll have care and oversight for their lifetimes, especially if it's likely they will be unable to earn a living.

Finally, keep in mind that for many grandkids, it's being remembered that matters more than the inheritance itself, especially if it's paired with a sentimental object from your estate. Consider a bequest as an opportunity to tell your grandchildren that they are loved.

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Joseph R. Marion III
Joseph R. Marion III
Whelan Corrente & Flanders LLP
(401) 270-4500
106 Clock Tower Square
Portsmouth, RI 02874
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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