If you are planning your estate as a grandparent, you’ll want to find a way to mention your grandchildren in your estate plan, most likely. However, if you would like to leave your grandchildren a significant amount and you also want to avoid the costs of probate. You may want to consider setting up trusts for each child.
Setting up trusts for grandchildren has countless benefits. First, trusts do not go through the lengthy and costly process of probate after you pass away. This means that the funds held within can be accessed quickly, and you will not waste inheritance in probate fees. But for young grandchildren, you also have additional options in trusts so that you can protect them from their newly acquired wealth. The following are some of your options for setting up trusts for your grandchildren.
Create discretionary distributions
You can create documentation to instruct the trustee to only release funds for certain uses. For example, if you want the funds to pay for your grandchild’s college education rather than enabling a party lifestyle, you could reserve a portion of the trust and instruct the trustee to only release it when it is being used to pay for college tuition.
Release sums of money at different milestones
It can be difficult for a young person to properly manage a large sum of money. Therefore, you may not want them to inherit anything until the age of 25, for example. The trust fund could then be released in 5-year intervals until they turn 40. Alternatively, you could create certain incentives for the child. Perhaps they will only be able to get access to their trust fund when they successfully graduate from colleges for example.
If you are planning your estate, there are many ways that you can plan for your grandchildren’s future in a smart way. Make sure that you understand all of your options before writing your will or setting up a trust.