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Skipping a generation with your estate plans

On Behalf of | Jan 28, 2021 | Estate Planning

People sometimes find themselves in a position where they don’t want to leave their assets to their next immediate kin. Whether that’s a son or daughter, stepchild or another party, they may decide to skip that generation and leave their assets to their grandchildren instead. 

If you would like to do that, then it’s a good idea to consider a generation-skipping trust. This is a trust that helps you pass down assets to your grandchildren while skipping your children. This trust helps you avoid estate taxes, which would potentially be paid if your grandchildren directly inherited your assets.

Generation-skipping trusts preserve your wealth

Generation-skipping trusts are a kind of wealth-preservation tool because those assets won’t be taxed when they pass on in the majority of cases. The grantor can select anyone to be the recipient of the trust, so long as that person is at least 37.5 years younger than the grantor and is not an ex-spouse or spouse. For example, if you have a friend who has a child you care about, you could leave them assets in a GST if they are at least 37.5 years younger than you.

Should you consider a generation-skipping trust?

Deciding what kind of trust you want to create can be difficult, especially if you are wealthy or have many beneficiaries to consider. You may want to use trusts of different kinds depending on your estate’s value and how much tax savings you’re looking to achieve. Our website has more on trusts and what you need to know about them as you start planning.