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You can leave assets to your grandchildren just as you can leave them to your children. But just because it's legally allowed doesn't mean the legal process is exactly the same, or that such a transfer is without its legal quirks.
Because there is a greater likelihood that your grandchildren will be minors when you create your estate plan, you may have additional concerns as well as additional options when creating trusts and gifts. Here are a few things to consider when leaving assets to grandchildren.
Most grandparents are concerned with funding their grandchildren's educations. And there are certain state and federal laws designed to facilitate that. A 529 plan, authorized by Section 529 of the Internal Revenue Code and offered through all public and some private colleges and universities, is a savings plan for future college expenses. A pre-paid tuition plan can lock in the price of tuition, while a college savings plan can cover all "qualified higher education expenses," and the contributions to both are exempt from federal taxes.
Additionally, just about every state has a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) statute that covers asset transfers to minors. You can set up an account under these statutes and make tax-free contributions that can be used for education or other expenses.
As you're probably aware, there are a plethora of trusts through which you can transfer assets. But there are three in particular that could be especially useful when transferring those assets to grandchildren:
If you have further legal questions or want help setting up a trust to leave assets to your grandchildren, you should contact an experienced estate planning attorney near you.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.