Estate planning to provide for grandchildren directly

In a world where people are all living longer, inheritances are being received by children much later in life.

When it is more difficult than ever for young people to get a foothold in the property market, it is becoming increasingly popular for people to consider making direct provision for their grandchildren in their estate planning.

For clarity, estate planning primarily consists of a person’s will and powers of attorney, but also includes any other documents or arrangements for the transition of wealth upon a person’s death or during their lifetime.

Traditionally, it has been most common for people to make provision via their will and estate plan directly to their children.

With many now living deep into their 80s and 90s (which is, of course, to be celebrated), children are now often not receiving an inheritance until they themselves are in their 50s and 60s, at a time when they are already financially well-established, and their living expenses are decreasing as their own children reach adulthood.

For many, grandchildren are in a position of greater financial need to either assist with the costs of tertiary education, entering into the evermore illusive property market or just getting a start in life.

With this shift has come the increasing popularity in making provision for grandchildren directly in the estate plan.

There are several ways in which this can be carefully and thoughtfully facilitated:

• Gifts of a specific sum

A gift of a specific sum of cash is a popular gifting option for grandchildren.

In practice, the grandchildren will receive a specific cash amount, whilst the children will receive the balance of the estate assets after payment of the cash gift or gifts.

The application of the cash sum will be at the complete discretion of the grandchild (as long as they are over 18 years of age).

• Creation of fund for grandchildren

Another popular option is for the will to create a fund for a specific purpose, such as education.

A set sum of money is nominated to create a fund whereby it is managed and invested by third parties (selected by the will-maker) to be applied for a particular purpose specified by the will-maker.

Once the purpose is completed (meaning all grandchildren complete tertiary education), there is usually a provision for how any balance of the fund then remaining is to be distributed.

• Creation of a testamentary trust for grandchildren

This option also deals with a specific sum of proportion of the estate, creating a trust for the benefit of one or multiple grandchildren.

It does not have a specific purpose, but has significant tax and asset protection benefits for the grandchildren, particularly into their adult lives.

• Other options

There are also a myriad of other options available, such as making gifts during your lifetime, specific to the wishes of the grandparents and their own individual financial circumstances, which can be discussed with an experienced estate planning lawyer.

For more information or to discuss personal wishes or intentions with regards to estate planning, phone the experienced estate planning team at Coulter Legal on 5273 5273 or email [email protected]