Considering Your Grandchildren’s Inheritance

  • Robert S. Thomas,
  •   Estate Planning, Probate
  •   Comments Off on Considering Your Grandchildren’s Inheritance


You love your grandchildren. You want them to be safe, happy, and well provided for. You want to leave them a sizeable inheritance. However, when planning what you want to leave them in your will, there is one giant roadblock in your path: estate taxes. Making the wrong choices can significantly increase your estate tax obligation, which reduces what you can leave your grandchildren.


You have numerous options of financially providing for your grandchildren while minimizing the tax impact on your estate.


  • Start a college savings account for your grandchild. The Internal Revenue Code allows you to set up a 529 college savings plan for your grandchild. Over time, you put money into a 529 investment plan, and so long as that money is used toward qualifying college expenses, you are not taxed on your contributions or earnings by the IRS. In addition, Illinois offers the Bright Start and Bright Beginnings 529 savings plans that allow for additional state tax benefits, such as the ability to deduct up to $10,000 for a single filer. You can essentially reduce your estate and avoid taxes by opening a 529 plan, while your grandchild directly benefits.


  • Gifting money to your grandchild or paying your grandchild’s education or medical expenses. The IRS allows for an annual, tax-exempt gift of $14,000 per grandchild. Of greater significance, you are allowed to directly pay your grandchild’s educational bills or medical expenses, without triggering the $14,000 gift exemption. Few gifts will have a greater impact on your grandchildren than allowing them to attend college without taking out a student loan.


  • Consider a Generation-Skipping Transfer (GST) Tax Exemption. If you have a very large estate, this exemption allows for a $5.49 million tax exempt transfer to your grandchild. An attorney is essential if you plan to make this transfer as you are subject to a massive 35% additional tax rate if you exceed the exemption.


  • Establish a trust fund for your grandchild’s benefit. It is likely that your minor grandchild, or even young adult grandchild, is not mature enough to manage a large sum of money. A trust fund allows you to specifically establish how much money they will receive, how often, and can also place conditions on your grandchildren to receive the money.


I can help you develop your plans for your grandchildren. Your goals and wants are important to me, and I will work hard for you. When you hire the Law Offices of Robert S. Thomas, my team and I will provide you comprehensive, professional, and compassionate guidance for all of your estate planning needs. For more than two decades, I have helped clients in the areas of tax law, estate planning, and probate law. Call our offices today at 847-392-5893 or visit our website to set up a consultation.

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