Estate planning is crucial for individuals looking to secure their financial legacy and provide for their loved ones after they pass away. In Delaware, grandparents have several estate planning tools available to help support their grandchildren’s future.
By strategically using these tools, grandparents can better ensure that their grandchildren benefit from their inheritance in a tax-efficient manner and aligned with their long-term well-being.
Creating trusts
One of the most effective ways for grandparents in Delaware to provide for their grandchildren is through the creation of trusts. Trusts can be specifically tailored to meet the grandchildren’s needs, whether for education, healthcare or general welfare. Grandparents can set conditions of a trust. This can include age thresholds for distribution or stipulations for how the funds should be used, ensuring that the inheritance supports the grandchildren’s development and responsible financial management.
529 college savings plans
For grandparents who wish to contribute to their grandchildren’s education, Delaware’s 529 College Savings Plans offer a tax-advantaged way to invest in their future. Contributions to these plans grow tax-free, and withdrawals for qualified education expenses aren’t taxed. Grandparents can set up a plan themselves, naming a grandchild as a beneficiary. They can also contribute to an existing plan to provide a direct boost to their grandchild’s educational fund.
Gifting
Delaware grandparents can also use gifting as part of their estate planning strategy. The IRS allows individuals to give up to a certain amount, called the annual exclusion amount per recipient per year, without incurring a gift tax. This is a straightforward way for grandparents to transfer wealth to their grandchildren during their lifetime. It also reduces the size of their estate and potentially lowers estate taxes upon their death.
Life insurance policies
Another strategy grandparents can employ is purchasing life insurance policies with grandchildren as beneficiaries. This approach provides a tax-free inheritance to the grandchildren upon the grandparent’s passing. Grandchildren can use life insurance proceeds for various purposes, such as paying for education, purchasing a home or investing in their future.
Any grandparent who’s interested in caring for their grandchildren through an estate plan should take the time to learn about their options. Having legal assistance may make it easier for them to evaluate their options and determine which will most effectively protect their grandchildren’s futures.
