Leaving Money to Grandchildren in a Trust
Upon the arrival of a sweet little bundle of joy, a grandparent’s thoughts often turn to the financial stability of their loved one’s future. Helping provide for your grandchildren by leaving them the assets you’ve accumulated is a common practice. However, the best way to go about it will be different for each family.
We all have a unique set of circumstances to consider. One popular choice is leaving money to grandchildren in a trust, because you can control the distribution of funds. You can also specify the age at which your grandchild will receive full access to the assets you leave them.
Leaving an Inheritance for Grandchildren
Grandparents often look for ways to help out with their grandchild’s college tuition, wedding, or the down payment on their first home. This type of beautiful gift can change your grandkid’s life.
After your needs are taken care of, and you are looking at ways to leave an inheritance for your grandchildren, here are a few you can consider:
- Outright cash gifts
- Roth IRA
There are pros and cons for each of these options, but they are all responsible, legal ways to leave money to your grandchildren.
If you are looking for ways to reduce the size of your taxable estate, making annual exclusion gifts could be a good way to transfer money to your grandchildren. A married couple can give up to $30,000 to any number of individuals each year, without incurring gift tax. For example, every fiscal year you and your spouse can leave $30,000 to each of your grandchildren and the funds will be free from federal gift tax.
You can also leave an inheritance for your grandchildren by naming them as beneficiaries on your Roth IRA or other retirement accounts. Your IRA will grow tax-deferred throughout your lifetime, and leaving the funds to your family members could help set them up for a comfortable life.
When naming minor grandchildren as beneficiaries, it’s best to designate a custodian for the funds to help regulate the distribution. One great option is to name a trust as the beneficiary for your retirement account. This can provide more flexibility and control.
Based upon recent IRS regulations and rulings, there is now a way to properly protect your IRA after you die—the IRA Inheritance Trust. Think of it as a revocable living trust designed specifically for your IRA. If you have IRAs (plus company retirement plans) totaling over $150,000, you owe it to yourself and your loved ones to learn more about this new IRA Inheritance Trust.
Plan Your Grandchild’s Inheritance with Phelps LaClair
Our team of experienced tax attorneys understands the complex IRS distribution rules and we are fully equipped to offer the ground-breaking IRA Inheritance Trust. This powerful technique has received a favorable published ruling from the IRS. If you’re ready to start the process of leaving money to grandchildren in a trust, or if have questions about how you can use the IRA inheritance trust in your estate plan, give us a call—we would be happy to help you!