Leaving an inheritance for the people in your family when you die requires careful advance planning. You need to understand what assets you have and what obligations your estate will have to handle after your death. Everything from creditor claims to estate taxes can diminish what you leave to others.
Complicated family circumstances can also impact the legacy you want to leave when you die. Perhaps your children will receive certain assets, like your family home or your business. Maybe they already have well-established lives and don’t require an inheritance, or maybe they have shown a tendency to misuse their resources.
If you want to leave assets for your grandchildren and not your children when you die, a trust helps make that happen.
A trust gives you control over what happens to your estate
When you create a trust and transfer assets into the trust to fund it, you create a legal entity tasked with managing and later distributing those assets when you die. There are many kinds of trusts, each of which can serve certain purposes.
You could use a specialized generation-skipping trust to provide an inheritance for your grandchildren without leaving assets for your children. You could also create a separate trust for each of your grandchildren and fund and structure each of them independently. Whichever approach you take, the main benefit will be that your instructions dictate what happens to those assets even after you die.
The problem with a grandchild’s direct inheritance
There are several issues with just leaving an inheritance for your grandchildren. One would be that they might inherit those assets when they are still too young to manage them properly or understand their value. They could not only make mistakes with their inheritance, but they could wind up the targets of those who intend to financially abuse them.
Another is the possibility that your children will have control over that inheritance until your grandchildren turn 18. Children with a history of bad spending habits or addiction could use up that inheritance before your grandchildren are even old enough to control their own inheritance.
Adding a trust to your estate plan can help you control your legacy, including what you hope to leave behind for your grandchildren.