For many people, becoming a grandparent is one of the single most exciting, and joyful, moments of their life. Becoming a grandparent also yet another opportunity to influence the life of a child with the advantage of having previous experience. If you are a grandparent who dotes on the grandkids, the odds are good that you will also want to include your grandchildren as beneficiaries in your estate plan. When it comes to gifting to your grandchildren, you may wish to consider the following tips from the Waukegan estate planning attorneys at Hedeker Law, Ltd.:
• Gift while you are alive. If your long-term plan is to pass down a portion of your estate to your grandchildren, make 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.
• Be careful 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 a 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.
• Make use 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.
• Use the yearly exclusion. The yearly exclusion allows every taxpayer to make tax-free gifts valued at up to $15,000 ($30,000 for married taxpayers) 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.
• Don’t forget to 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.
• Pass down your legacy when you make 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 who you hope your grandchildren will one day become.
• To reduce the likelihood of disputes, gift equally. 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 as a way 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.
• Avoid gifting a large lump sum. 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 at ages 21, 25, 30, and 35. As the Settlor (creator) of the trust, you create the terms.
Contact Waukegan Estate Planning Attorneys
Please join us for a FREE upcoming seminar. If you have questions or concerns regarding making gifts to your grandchildren, contact an experienced Waukegan estate planning attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
Latest posts by Dean R. Hedeker (see all)
- When Should I Start Receiving Social Security Retirement Benefits? - December 7, 2018
- Estate Planning for the Blended Family - December 5, 2018
- Tips for Creating a Trust - November 29, 2018