By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Estate Planning and Trust Attorney
A grandchildren’s trust is very similar to the type of trust a parent might create for his or her children, but it is the grandparent creating the trust, not the parent. A grandchildren’s trusts can not only benefit the grandchildren, but also the grantor if it is set up properly by lowering the grantor’s estate tax.
There are requirements that must be satisfied when dealing with grandchildren’s trusts.
Grandparents often create grandchildren’s trusts to provide funds for a specific purpose, such as education or the purchase of a first home. But these trusts also allow the trustee a great deal of freedom when choosing to make a distribution for other purposes. As with a children’s trust, they are sometimes created with a termination date so that the principal is distributed to the beneficiary at a specific age.
A grandparent can lower their estate tax with annual gifts to a grandchildren’s trust(s). You can fund a grandchildren’s trust during your lifetime with annual gifts equal to the current annual exclusion amount. The annual exclusion amount is the amount that can be transferred without tax. This amount is adjusted annually based on the annual cost of living index.
Funding grandchildren’s trusts is a great way for a grandparent to remove assets from their estates, especially if they suspect their estates may be taxable at their deaths or long term care becomes a reality in the future.
To discuss your NJ Estate Planning and Trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.