6 Ways to Pass Wealth to Your Children and Grandchildren - BK Estate Planning Attorneys (2024)

FAQs

6 Ways to Pass Wealth to Your Children and Grandchildren - BK Estate Planning Attorneys? ›

By setting up a trust, you can state how you want the money you leave to your grandchildren to be managed, the circ*mstances under which it can be distributed, and when it should be withheld.

By setting up a trust, you can state how you want the money you leave to your grandchildren to be managed, the circ*mstances under which it can be distributed, and when it should be withheld.

Another option for giving is to create a living trust. With a living trust, you can put the assets in the trust's name and add your heirs as beneficiaries. This means that upon your death, the assets will transfer to your heirs according to your wishes.

Create a Trust

Trusts protect your children's interests, and the assets in them avoid probate (which maintains privacy). You can appoint a company, such as the one that helped you establish the trust, or a knowledgeable and trusted person as the trustee to manage assets and control distributions from the trust.

A trust fund can also protect your loved ones against themselves. If you worry they might spend the money too quickly, you could set up a trust that limits how much goes out over time, including passing wealth on between generations, like first payments go to your kids and then continue to your grandkids.

Give now or later: The IRS doesn't care

For tax purposes, the timing of your generosity makes little difference if your family is not likely to be subject to estate taxes. The U.S. tax code makes it fairly easy to give your children money, stocks or other investments or a piece of the family business.

Most debt isn't inherited by someone else — instead, it passes to the estate. During probate, the executor of the estate typically pays off debts using the estate's assets first, and then they distribute leftover funds according to the deceased's will. However, some states may require that survivors be paid first.

How to pass wealth to children tax free? ›

Strategies to transfer wealth without a heavy tax burden include creating an irrevocable trust, engaging in annual gifting, forming a family limited partnership, or forming a generation-skipping transfer trust.

In fact, default inheritance laws in nearly every state reflect this common desire to provide first for children and then for the grandchildren in the event that an adult child predeceases the grandparent.

You can transfer money into a trust established to benefit a grandchild. You can reduce your taxable estate while earmarking funds for the higher education of a grandchild through the use of a “529 account.” You can use other gift vehicles like IRAs and savings bonds.

Your estate will pay 40% in federal gift and estate tax for any assets transferred above the federal exemption. In addition, if you're giving assets to grandchildren (or future generations), an additional layer of tax called the generation-skipping transfer (GST) tax may apply at 40%.