As we are able to save, invest, and increase our property, our thoughts often turn to helping our descendants. You may have a special relationship with your grandchildren, and that naturally makes you want to provide for their future. However, that positive desire can become a problem if you do not adequately prepare how you pass on your wealth. If you want to give some of your assets to your grandchildren, here are five potential problems and how you can avoid them.
1. Including no age stipulation
None one really knows how old our grandchildren will be when we die. If they are younger than 21, or if they are not responsible with money, they may not know how to deal with large sums of money and may waste their inheritance.
How to avoid this pitfall: You can create a trust that controls your assets for years after you pass and is not dependent on your grandchildren’s age when you die.
2. Too much, too soon
Age is not the only factor into determining how much your grandchildren should receive. Their responsibility and maturity are also important. If you give them too large of an inheritance and before they have learned how to manage money, they may not make correct decisions with their inheritance and squander it.
Avoiding this pitfall: Giving your inheritance outright is not the best option. Fortunately, you have more options than lump sums. You can stagger distributions according to stages or ages, give complete discretion to the trustee for all distributions, or other strategies. Designing a trust can be a complicated process, but an estate planning attorney can help you discern what options are best for you.
3. Not communicating how you would like your grandchildren to use the inheritance
If you have any specific desires with how your grandchildren use their inheritance, you need to explicitly tell them. If you do not do so, your grandchildren will not know what you want the focus of their inheritance to be, whether it should be on on college, a home, or a business, then you need to state that focus in your estate plan. That way, you can influence how your property is spent as part of an inheritance.
Avoiding this pitfall: Talk with your estate planning attorney to help you identify what matters to you and how to clearly express your priorities in your estate plan.
4. Being ambiguous in your language
Money and grief can have odd effects on people. Good people have become greedy and jealous after the death of a loved one. You need to be clear in your trust about who gets what, how, and when. Any ambiguity in your plan can have massive effects on how well your grandchildren follow and respect your plan.
Avoiding this pitfall: You must be very clear in your plan about your grandchildren’s inheritance. Again, talk with your estate planning attorney to help you choose clear language that expresses your wishes.
5. Touching your retirement
Some grandparents use the money they have been saving for retirement to give to their grandchildren, especially if a problem arises. However, money that you have given away is almost impossible to get back.
Avoiding this pitfall: You cannot always fix everything for your grandchildren. If you feel the need to help them with anything, you should not jeopardize your retirement. Set up a trust or give them their inheritance early, but you should not place your own financial future at risk.