The Benefits of Giving Gifts to Your Grandchildren in Trust

There are some serious drawbacks to many options for giving gifts to grandchildren. For instance, there might be no tax or estate planning advantages. Or, you may have no control of the funds (or lose control after a certain point). The money could also affect a grandchild’s eligibility for financial aid.

An option that overcomes many of these problems involves transferring money into a trust established to benefit a grandchild. 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 $16,000 (in 2022) 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;
• Amounts deposited in trust, and the income earned from those funds, will be used for the benefit of your grandchildren; and
• You can provide that the trust terminate at any age you specify.

What Are the Potential Restrictions With Trusts?

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.

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David Wingate is an estate planning and elder law attorney at Estate and Elder Planning by David Wingate. The Estate and Elder Planning office services clients with powers of attorneys, living wills, Wills, Trusts, Medicaid and asset protection. The Elder Law office has locations in Frederick, Washington and Montgomery Counties, Maryland.

Notice: this Blog is published as a free service of the Estate and Elder Planning by David Wingate. The information is for general informational purposes only and does not constitute legal advice. For specific questions, please consult with one of our experienced attorneys. We encourage you to share this newsletter with anyone you think may be interested.