There are some serious drawbacks to many options for giving gifts to grandchildren. Either there are no tax or estate plannin...Read more
Consider Putting Gifts to Grandchildren in a Trust
- March 16th, 2016
Gifting assets to your grandchildren isn't just a nice thing to do; it can reduce the size of your estate and the tax that will be due upon your death. Grandparents can give their grandchildren up to $14,000 a year (in 2016) without having to report the gifts. While you can make an outright gift, pay health care and school costs directly, or put the money in a custodial account, putting the money into a trust has some major advantages.
With the help of an attorney, you can draft a trust that reflects your express wishes about when the income and principal will be available to the grandchild, and even how the funds will be spent. Transferring funds into such a trust offers the following benefits:
- You can reduce the size of your estate by transferring up to $14,000 (in 2016) into each trust you create for each grandchild. No gift taxes will be due in connection with the transfers.
- Although the trust owns the assets, you control them as trustee and can decide what type of investments to make.
- Income earned by the trust from amounts that you've deposited will not be taxed to you; the trust pays the taxes.
- Amounts deposited in trust, and the income earned from those funds, will be used for the benefit of your grandchildren.
- You can provide that the trust terminate at any age you specify.
In order to qualify for these benefits, however, certain restrictions apply. These trusts are complex legal documents and should not be set up without the help of an experienced attorney. As a result, the chief downside of such trusts is the cost of establishing and maintaining them, which you should discuss with an attorney before going ahead with a trust.
Local Elder Law Attorneys in Ashburn, VA
Hale Ball Carlson Baumgartner Murphy PLC
Jean Galloway Ball is certified in Elder Law by the National Elder Law Foundation. She is a 1977 honors graduate of the National Law Center, George Washington University, and she did her undergraduate work at the University of California at Berkeley, graduating Phi Beta Kappa in 1971. She is admitted to practice in Vir...
Ron M. Landsman, P.A.
Ron M. Landsman has been practicing elder law since 1983, before it was known as elder law, originally with Landsman and Laster, Washington, D.C., then Landsman, Eakes and Laster, also in Arlington, VA, and since 1990 in his own practice in Montgomery County, Maryland. He has been among the most active members of the...
As a final note on establishing such trusts, you must be totally comfortable with this gift planning strategy and the amount of money available to you in your estate. In short, you should only make gifts if you feel certain that the amount of funds remaining in your name and the amount of income they will produce will be adequate for your needs.
Speak to your elder law attorney about setting up such a trust.
For more on gifts to grandchildren, click here.
Last Modified: 03/16/2016