There are many different ways to legally transfer your money and property to your grandchildren after your passing. However, some methods give you a greater amount of control over when and how inheritances are distributed and could even pass on a greater portion of your holdings to future generations. No matter which estate planning instrument you use, you should carefully consider the potential impact of each one before making your final choice.
Can't I Just Leave Money and Property to the Grandchild's Parent?
Many people choose to simply leave their assets to their children (the grandchildren's parents), assuming that their grandchildren will indirectly benefit from the inheritance. If you have no will, New York intestacy laws provide first for children and then grandchildren after your passing, so naming your children as beneficiaries may seem like the most practical solution.
Unfortunately, there are a number of reasons inheritances to parents might not "trickle down" to your grandchildren, including:
- Spending or redirecting funds. Even if you expressly state that money given to parents is to be used for the benefit of a grandchild, beneficiaries are under no legal obligation to spend the inheritance as directed. As named beneficiaries, your children may decide to go on vacation, remodel their home, or otherwise spend the inheritance as they please.
- Bad investments. Your children may use your inheritance to buy into real estate, cryptocurrency, or any other investment scheme in an attempt to grow their wealth. If these investments turn sour, there may be nothing left to pass on to your grandchildren.
- Poor habits. If a parent has a history of addiction, financial trouble, gambling, emotional instability, or other problems, leaving them a large lump sum could do more harm than good.
- Divorce. If the parents divorce, half of the inheritance you earmarked for the family could go solely to the ex-spouse. If your son- or daughter-in-law remarries, some of your property could be passed down to children who are not your blood relatives.
How to Make Sure Grandchildren Receive Their Rightful Inheritances
If they are over 18, your grandchildren can inherit directly by naming them as beneficiaries in your will or trust. However, any grandchildren who are minors at the time of your passing will need certain structures in place to hold their inheritances before they come of age.
Our estate planning attorneys can help you find the best way to:
- Include future grandchildren. Your beneficiaries are likely to change multiple times over the course of your life, especially as new grandchildren come into the world. Instead of making an amendment each time a new child is born, we can structure your will or trust to provide for additional family members. You could even provide for third or fourth generations, contributing to the financial stability of your family long after your passing.
- Use your beneficiary designations. Bank accounts, life insurance policies, stocks, or pensions can pass directly to beneficiaries without the need to go through probate. If you name a grandchild as a beneficiary on your payable on death (POD) or transfer on death (TOD) forms, they can collect the balance without paying fees or taxes. However, these funds may be held in a custodial account for minors until they reach majority age.
- Plan timed distributions. If you have a large family or considerable wealth, it may be best to create a trust-based estate plan to ensure your final wishes are honored. You can specify a set amount of money or property to be distributed to each grandchild at certain times, such as when they marry or after their first child is born. Trusts offer the additional benefits of avoiding probate and preventing family wealth from being lost to a grandchild's spouse in a divorce.
At Landskind & Ricaforte Law Group, P.C., our attorneys can help you craft an estate plan that benefits current and future family members after your passing while minimizing taxation on your assets. Contact us today through our online form to learn how we can be of assistance.