13 Apr Including Grandchildren in Your Will
Many grandparents wish to include their grandchildren in their will. They may set up life insurance policies or specifically bequeath dollar amounts of possessions to the grandchildren in order to see that they are provided for. Some go so far as to set up provisions for how the money is to be used, whether it be for college, cars, or weddings. The decision to include grandchildren in your will is completely personal. Even though you may have conversations with your grown children and talk to them about your wishes, the only real way to make sure that they are carried out is to draft a will that specifically includes your grandchildren. As difficult as it may be to talk about, the truth is that dying and the division of estates, when not handled properly beforehand – can be the source of animosity, greed, and major implications to the family structure.
In addition to a last will and testament, you should also set up a living will. This is often referred to as a health care directive. However, besides these two documents there are certain documents that must be in place in order to include your grandchildren in your will.
You must make sure that your will governs who the executors, guardians and trustees of your will are. If you have minor children, these are necessary to see that the monetary assets you are leaving to your grandchildren will not be tied up in red tape. You should designate one person in your family as the power of attorney – whom you will trust to handle the financial ramifications of your will and other matters. This person will not necessarily be able to over ride your last will and testament – but will be able to mediate and intervene should problems arise.
If you have life insurance and want to make sure that the grandchildren are included, you must designate them as beneficiaries. If these are minor children, clauses should be in place that ensures the money stays in escrow until they reach a certain age or milestone. Designate the parents as guardians of the account and make it impossible for them to touch the money before their child is a certain age. As for how much life insurance you need, you should speak to a trusted and qualified insurance professional. Rates vary greatly from company to company, and you should research thoroughly.
Another problem that can arise from not properly planning to include your grandchildren in your will is unclear language. Simply designating a percentage of the estate or a specific dollar amount to all grandchildren is not enough. You must list the grandchildren specifically, providing date of births and social security numbers of these children to ensure that the money is properly divided. Additionally, keep in mind that more grandchildren may be born after you pass away. Should these children be included as well? If the answer is yes, you must make provisions and develop escrow estate funding that will be in place to prepare for them. Not doing so can have your grown children suing one another – and leave your estate ending up in disarray until the court system can intervene and make decisions.
When you designate executors for your grandchildren which are mandatory if you want the money to stay out of state or federal judicial processes – you don’t necessarily have to make that person the parent of guardian. If you so choose, you can find an outside agency, a trusted friend or professional acquaintance to act in the best interest of your grandchildren. Again, make the language very specific as to your wishes to ensure that no legal discrepancies arrive. Including your grandchildren in your will and ensuring that they receive things exactly as you want are very particular events that should be overseen by an attorney.
If you have an extended stepfamily, it is very important that you specifically include these children – names and social security numbers, should you want them to receive something as well. Unless your child has officially adopted a stepchild, the judicial system will not see them as legally qualified to receive any requests unless you state their name.
Obviously, another consideration is taxation. You want to include your grandchildren in your will, but not prematurely burden them with tax problems. Legally, you can transfer $12,000 per year to grandchildren without it being taxed. This means that two grandparents can give up to $24,000 per year to their grandchildren without the grandchildren being responsible for taxes. Also, understand that there is a skipping tax that can be imposed if you bequeath to grandchildren but skip the children. For especially large estates, simply leaving money or instructions to the grandchildren is not enough. You must be extremely clear on the laws and on the exact amounts and purposes of the money being left. You can legally set up accounts before you die and designate your grandchildren as beneficiaries that fall under certain tax requirements to ensure your grandchildren are not overly taxed.
When you are talking about estate law, it is difficult to be over prepared. If you want to include grandchildren in your will, it is essential that you speak with a professional and ensure that the language of your will is clear. When dividing physical assets, it is also essential to make sure that specific items are designated specifically if you wish them to be. You cannot just say that grandchild A is to receive your hall painting and expect that they will get it. The division of assets, especially when transcending generations and multiple children and grandchildren should be reviewed periodically and discussed with your family ahead of time. The bottom line is that estate law is about wording and preparation – and not about having conversations that designate your wishes. The worst thing that can happen is that your estate ends up in court for months or years on end. You also don’t want to leave confusing messages that can end up dividing your family.