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How to account for grandchildren within an estate plan

It’s not uncommon for parents to pass down assets such as an Indiana home, a bank account or a car to their children. If you have grandchildren, it’s a good idea to consider how you might want to transfer assets to them as well. Fortunately, there are many strategies you can use to ensure that your heirs get their inheritance in a way that conforms with state and federal law.

How old are your grandchildren?

If your grandchildren have not yet reached the age of majority, it may be necessary to put their inheritance into a trust. This is because minors are not allowed to manage assets on their own. Creating a trust allows you to determine who manages a home, bank account or other property until a beneficiary is old enough to do so on his or her own. Furthermore, a trust makes it possible to place limitations on how an inheritance is used.

You may be able to make gifts directly to a grandchild

In the event that your grandchild has reached the age of majority, it may be beneficial to make gifts to that person during your lifetime. Generally speaking, your younger heir won’t need to pay taxes on a gift regardless of its value. Furthermore, the value of your estate will likely be reduced by the amount of the gift. Therefore, it may reduce the amount that is owed to the government at the time of your passing. However, if your grandchild is still a minor, it may be worthwhile to contribute to a child’s 529 education savings account instead in your estate plan.

Taking time to consider your estate planning needs today may make it easier to meet your plan goals after your pass. Furthermore, it may reduce the chances of family infighting that could strain relationships or make it harder to settle your affairs in a timely manner.