You want to leave money to your children, but you’re also worried about your grandchildren. You’d like to ensure that they get some of what you’re leaving behind, that it isn’t lost by the next generation due to divorce or poor financial planning.
The first thing to do is to sit down with your kids and talk about your estate plan, your intentions and how you want the grandchildren to be involved. If they know what you want, you can often simply work together to set up accounts and other channels to ensure that the money goes to the grandchildren.
If your children are divorced or not yet married, you may also want to talk about prenuptial agreements. One fear that you have could be that your child will lose half of the money in a divorce or buy assets with his or her spouse, which will then be lost. Either way, you don’t want someone who may only be in your family for a short time to take a significant amount of the money. A prenup can make sure that doesn’t happen.
Furthermore, you can set up a trust. This way, even though the grandchildren are minors, the money belongs to them. It’s not in your children’s estates and can’t be spent or lost in a divorce. It’s set aside for the grandchildren, and the trust can even dictate when it pays out to them — perhaps when they reach a certain age.
These are not all of your options, but you can see that there are tactics you can use to divide your assets the way you want and to protect them if you think the next generation may lose them. Be sure you know all of the estate planning tactics available to you.
Source: The Balance, “How to Protect Your Child’s Inheritance From Spouse,” Julie Garber, accessed April 27, 2017