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Providing for grandchildren in your estate plan

On Behalf of | Mar 23, 2021 | Estate Planning

Whether you have recently welcomed your first grandchild or you are the proud grandparent to several little ones, you might have been thinking about adjusting your estate plan accordingly. Texas grandparents have several options for leaving assets to subsequent generations. 

Review these considerations when creating or updating your will to include your grandchildren. 

Establishing a trust

Because you cannot leave property or assets directly to minors, many grandparents create trusts for grandchildren. You transfer the assets in question to trust ownership and name a trustee who will manage the funds until your grandchildren reach a predetermined age. At that point, they will receive full control of the inheritance. 

Making annual gifts

Gifting funds to your grandchildren during your lifetime can help you avoid taxes as well as reduce their tax burden on a future inheritance. Currently, you can make a tax-free gift of $15,000 per year per individual, or $30,000 if you have a spouse. The IRS adjusts this threshold periodically. 

If you do not want to simply make cash gifts, consider investing in a 529 savings plan. You can contribute $15,000 for this plan for five consecutive years, and your grandchild can withdraw the funds tax-free to pay for education expenses when the time comes.  

If you leave your entire estate to your grandchildren, you may have tax considerations if your assets exceed $11.7 million (in 2021). The remainder would be subject to tax if you leave it to your grandchildren while leaving it to your spouse or children results in tax breaks.