What is a Generation-Skipping Trust?
If you have been planning for who you would like your assets to go to, you have probably run across trusts. There are several types of trusts and many reasons you would use one to protect your assets. Choosing the best type of trust is vital, as there are significant differences in how they operate.
Trusts can play an essential role in your planning. If you are estate planning, it is crucial to understand what a trust can do. It is also important to know the types of trusts available. An experienced estate planning lawyer may be able to assist you and make sure you are making the best decision. Any money you left to your beneficiaries can be controlled by a trust after your death. In a will, beneficiaries receive money when you die. In a trust, it can be established when beneficiaries get the money and how much they receive in increments. There are living trusts, irrevocable trust, and, depending on your situation, a generation-skipping trust could be right.
What is a Generation-Skipping Trust?
Essentially, it is a trust that skips a generation before the assets are disbursed. For instance, if a grantor created a trust that their grandchildren could access, but their children could not, that would be a generation-skipping trust. It is a trust usually used in situations where the grantor has significant wealth and assets and is used to preserve that wealth.
There are other reasons to create a generation-skipping trust. Using this type of trust can help save on estate taxes by skipping a step in the generational ladder, from one generation to the next. Depending on the number of assets, estate taxes can be near 40%. There is also a generation-skipping trust tax, which was instituted in light of these types of trusts.
Can Generation Skipping Trusts Skip More Than One Generation?
Generation-skipping trusts can skip more than one generation. They do not necessarily mean the generation being skipped receives no inheritance. It depends on what the grantor’s wishes are, and how the trust is set up. The trusts can also be set up for specific reasons, like for education, and are usually used in situations where the grantor’s children or heirs have a significant wealth of their own.
Is a Generation Skipping Trust an Irrevocable Trust?
There are some things to know about a generation-skipping trust. First, it is considered an irrevocable trust, which means it cannot be changed after being instituted. It can be written with future situations in mind but cannot be changed or canceled. Therefore, it is vital to put a lot of thought into putting a generation-skipping trust in place and considering who will benefit from it.
As with all trusts, the usefulness of a generation-skipping trust depends on your situation. For instance, there are several options available, especially when assets may not be enough to benefit from a generation-skipping trust. A living trust, which allows the grantor to change it until they die, is one option that gives the grantor more control and can work better depending on the situation. Determining which trust is right for you depends on your circumstances and the reasons you have for creating the trust.
Contact an Estate Planning Lawyer
If you are considering a generation-skipping trust, and are starting to look at options, an experienced estate attorney can help you make the right decisions for your situation. The Mattar Firm has experienced estate planning lawyers to meet with you and prepare your estate plan. Call today at 239-222-2222.