There are different types of trusts available to help you with your estate plans. If you want to make sure your grandchildren receive your property directly from you without going through other family members, a generation-skipping trust may be the solution.
Policy Genius explains that a generation-skipping trust allows you to designate “skip persons” to receive assets from the trust. Here is a look at people who may benefit from a generation-skipping trust.
Common skip persons are grandchildren. The assets in the trust will bypass their parents and go straight to your grandchildren, avoiding the need for your adult children to pay estate taxes on it.
However, another option is to assign your great-grandchildren as beneficiaries. Your trust could skip over your grandchildren or benefit both your grandchildren and great-grandchildren.
You do not have to restrict your generation-skipping trust to your descendants. You can leave an inheritance to other family members, such as nephews, nieces, grandnephews, grandnieces and cousins. In fact, you do not have to include only relatives in the trust. You may name anyone that is not your spouse as long as the person is 37.5 years younger than you.
Finally, you can assign another trust as a beneficiary. If you design a link of trusts to benefit family members or friends, you could have your generation-skipping trust hold particular assets until you want them to pay out to one or more trusts.
Generation-skipping trusts are one way families with significant wealth and land can help preserve their assets for future generations. Consider your options in light of your priorities for your loved ones.