You’ve done pretty well for yourself, and your adult children are all fairly secure in their lives. They even have children of their own now — and you adore your grandchildren.
In fact, you’re starting to think that you’d prefer to leave much of your assets to your grandchildren to help ensure that they will get a great start in life.
Trusts offer significant advantages for transferring wealth
With new changes in the tax laws, a trust is one of the best ways to transfer wealth to a younger generation. Here’s why:
- You can gradually reduce the value of your estate (and, thus, the estate taxes) by transferring money into each trust you set up. Currently, the law allows you to transfer up to $15,000 per child without incurring gift taxes.
- The money in those trusts can still be invested as you see fit. If you set yourself as the trustee until your death, you will still direct how the assets are handled.
- Moving this money into a trust also reduces your personal liabilities. Not only is the money secured against threats from creditors or misuse, the taxes on the money will be paid by the trust, not you.
You can set the trust to terminate at some future point of your choosing. For example, you can arrange for each trust to end when its beneficiary turns 25 years of age.
While it’s also possible to set rules on how money from a trust can be used, you need to be cautious about your decisions. You don’t want to make a trust so restrictive that it can’t accommodate your grandchild’s changing needs. Working with an experienced attorney can help you understand more about the options you may have and what to do next.