When you begin your estate planning process in Tennessee, your beneficiaries may extend past your children. As your children grow and start families of their own, their children become an important part of the family. For many grandparents, the future of their grandchildren is as important as the future of their own children. Can your grandchildren benefit from your estate? The answer is that you can add your grandchildren into your estate plan.
What type of trust can you use for your grandchildren?
CNN reports that to protect your grandchildren, you would need a generation-skipping trust. You may also see the term “legacy trust.” This type of trust provides you with the ability to transfer tax-free benefits to beneficiaries born at least two generations beyond you, i.e. your grandchildren. If you want the trust to remain tax-free, you cannot leave more than the exemption amount.
Can you age restrict the trust?
Young people do not always make wise decisions with their money. If given a large inheritance at 18, your grandchildren may not use the money to enhance their future. Instead, they may buy cars or wardrobes. It makes sense that you may want to protect your grandchildren from wasting their money. If you want to protect your beneficiaries from themselves, then you can age-restrict the trust.
Are generation-skipping trusts safe from creditors?
Estate planning is all about the future. If your grandchildren are young now, you may be unsure of how they will handle money as adults. Even when someone is responsible, there is no telling what the future holds. Currently, your grandchildren probably do not have any problems with creditors or ex-spouses. Likewise, they probably do not face lawsuits. Although it is not a concern now, it may be a problem in the future. A trust protects the assets and guarantees that only your grandchildren benefit from their trust.