Do you know the benefits of using a generation skipping trust? People often leave their assets to their children or a surviving spouse outright; however, a generation skipping trust can preserve your assets for your grandchildren, great grandchildren, or other young beneficiaries.
Generation skipping trusts are designed for you to provide financial resources for the benefit of your children by offering them access to trust income or principal, while leaving the remaining assets in the trust for your grandchildren. Continue reading to learn more about how you can use a generation skipping trust to help bring your vision of the future to life.
What Is a Generation Skipping Trust?
A generation skipping trust is a type of multi-generation trust under which your assets can pass for your grandchildren — instead of your children — essentially skipping a generation. The most basic and simplest generation skipping trust will only involve your grandchildren as the beneficiaries. However, there are more common types of generation skipping trusts that include several generations of different beneficiaries.
Because a generation skipping trust transfers assets from your estate to your grandchildren, your children will never take title to the assets. This is what allows them to avoid the estate taxes that would be applicable if the assets were first transferred to your children.
In fact, the recipient of the generation skipping transfer doesn’t have to be a family member. The individual receiving the transfer can be anyone who is at least 37 ½ years younger than you. Generation skipping trusts are powerful wealth-preservation tools for those who have accumulated significant savings and assets.
When Should a Generation Skipping Trust Be Used?
If your children are well off or well-established financially, it may be smart to use a generation skipping trust. This powerful legal tool will allow you to set aside your legacy in a trust where the permissible beneficiaries of the trust assets are both your children and your grandchildren. The trust assets can then be utilized to pay higher education expenses and similar expenses for your grandchildren. In addition, the funds can be set aside for a vast range of financial goals.
The assets will remain in the trust for the lifetime of each of your children. Upon a child’s death, the assets will be held in trust for the children of the deceased child — your grandchildren. However, the generation skipping trust protects the moneys in the trust (including any undistributed income and appreciation) from being subject to transfer taxes in your children’s estates. This strategy helps ensure your grandchildren receive the most out of the inheritance.
Generation Skipping Trust Can Be Helpful in Divorces
A properly drafted generation skipping trust can be vital in a range of different situations, including when a child is a part of a difficult divorce. The funds in the trust aren’t subject to equitable distribution. This type of trust can be used to make sure that your assets pass to your grandchildren – not your child’s former spouse.
Further, in the event any one of the beneficiaries incur debt, creditors will be unable to access the trust assets to pay those debts. Even in the event of unforeseen hardships, the funds inside of the generation skipping trust will remain safe and readily available for the benefit of your family members, so you can help them build a stronger future — even after you’re no longer around.
Contact Certilman Balin Attorneys
Generation skipping trusts are a useful tool if you’re looking to preserve assets for future generations. Designing and utilizing generation skipping trusts can be complex, but the experienced attorneys at Certilman Balin can help.
Contact Certilman Balin today to learn more about creating a generation skipping trust.