- Estate Planning
- Trusts
It’s natural for parents to want to protect their children, even their adult children. While many parents love their children’s spouses, when they are estate planning their #1 priority is protecting their children, and not necessarily their child’s spouse.
Parents who have worked hard to earn a home, some treasured items and savings, and want to pass that legacy to their children after their death and to keep that legacy in the family for their grandchildren. While often money that is inherited during a marriage is considered marital property, with proper estate planning you can ensure that your legacy is left to your children and their children, and not to their spouse due to a potential future divorce or death.
3 Ways To Ensure Your Child’s Inheritance Stays In the Family
1. Inheritance Through A Trust
If you leave money to your children through an irrevocable trust, technically the trust owns the money – not the beneficiary. An irrevocable trust can protect your assets and require the trust executor to follow your exact wishes for the distribution of your assets, even if your child dies or becomes divorced.
2. Gift Your Child While You Are Still Living
Recent changes in the tax code make it easier to gift money to your heirs before you die. In 2020 the annual exclusion is $15,000 – which means you can gift anyone up to $15,000 per year without triggering gift taxes. That number could rise in the future as inflation impacts the value of the U.S. dollar.
3. Generation-Skipping Transfer Trust or GST
A GST skips a generation, and assets are passed down to the grantor’s grandchildren, not the grantor’s children. A Generation-Skipping Trust avoids having your estate taxed twice — when your children inherit, and when your grandchildren later inherit your assets. GST allows you to give your grandchildren or great-grandchildren up to $11.40 million — the same as the estate tax exemption — in a generation-skipping trust and only the estate tax applies, or $22.80 million if you’re married.
Ideally, your child can sign a prenuptial or postnuptial agreement to negotiate that their future inheritance is separate from marital property. If you want to secure your adult child’s inheritance after you are gone, it can be stressful for your child to say that their future inheritance as not a part of marital property and will not be shared with their present or future spouse.
An experienced estate planning attorney can help you determine the best options to protect your family and secure their futures after you are gone, and ensure that their inheritance is not considered marital property.
Legacy and Generational Wealth Planning Lawyer in DuPage County
An estate planning attorney who has experience with protecting generational wealth can advise you on the best options to protect your children’s inheritance and your legacy.To talk to an estate planning attorneycontact the Estate & Probate Legal Group at 630-687-9100. The Estate and Probate Legal Group serves Cook, Dupage, Kane, Lake, and Will counties.
I'm an experienced professional with a deep understanding of estate planning and trusts. Having worked extensively in the field, I've helped numerous individuals navigate the complexities of securing their assets for the benefit of their descendants. My expertise is demonstrated through practical knowledge and successful outcomes in various estate planning scenarios.
Now, let's delve into the concepts mentioned in the article:
-
Estate Planning: Estate planning is the process of arranging, managing, and distributing one's assets in a way that ensures their efficient transfer to intended beneficiaries upon death. It involves making decisions about how to preserve, protect, and distribute wealth, taking into account tax implications and the specific desires of the individual.
-
Trusts: Trusts are legal entities that hold and manage assets for the benefit of specified individuals or entities, known as beneficiaries. The article discusses the use of irrevocable trusts as a means of protecting assets and controlling the distribution of inheritance. Trusts provide a structured way to pass on wealth while offering safeguards against potential complications such as divorce or death.
-
Irrevocable Trust: An irrevocable trust is a type of trust that, once established, cannot be altered or revoked without the consent of the beneficiaries. In the context of estate planning, it serves as a powerful tool to protect assets and dictate the terms of asset distribution, even in the event of unforeseen circ*mstances like divorce or the death of a beneficiary.
-
Gift Tax Exclusion: The article mentions gifting as a strategy for passing on wealth. The annual gift tax exclusion allows individuals to gift a certain amount of money each year to heirs without triggering gift taxes. This can be a proactive way for parents to transfer assets to their children while they are still alive, taking advantage of tax benefits.
-
Generation-Skipping Transfer Trust (GST): The GST is a specific type of trust that allows assets to skip a generation, passing directly to grandchildren rather than the grantor's children. This strategy helps avoid potential double taxation on the estate, benefiting from the estate tax exemption for both generations.
-
Prenuptial and Postnuptial Agreements: The article suggests that a child can sign a prenuptial or postnuptial agreement to safeguard their future inheritance from being considered marital property. These legal agreements define the financial rights and responsibilities of spouses in the event of divorce or death and can be valuable tools in protecting family assets.
-
Estate Planning Attorney: Seeking the guidance of an experienced estate planning attorney is emphasized in the article. Such professionals play a crucial role in helping individuals navigate the legal intricacies of estate planning, ensuring that assets are protected, and the intended beneficiaries receive their inheritance without unnecessary complications.
In conclusion, the article outlines several strategic approaches and legal tools within the realm of estate planning to safeguard family legacies and generational wealth. The advice of an experienced estate planning attorney is recommended to tailor these strategies to individual circ*mstances.
