When my father-in-law died, we discovered that he included a
provision in his will for the grandchildren who were alive at the
time of his death. It was a generous and thoughtful gesture and
fairly easy to dispense. As we closed his estate, we also found a
life insurance policy that named his grandchildren as beneficiaries.
That caused a bit more of a problem.
When my father-in-law set up the policy, he assumed he would be
alive for many years, seeing he was in good health. But his sudden
death in a car accident happened when his grandchildren were still
minors. To release the life insurance payment, my husband and I had
to get a court document stating we were the legal guardians of our
children. I'm sure my father-in-law would have been angry about the
red tape we had to cut through to finalize his estate.
Remembering grandchildren in a will is important to many
grandparents, and, of course, each grandparent will have his or her
own reason for why or how they bequeath a gift in their will.
However, leaving part of an estate to a grandchild requires
additional planning and considerations.
All adults, of course, should
have a will. David F. Woods, president of the Life and Health
Insurance Foundation for Education, recommends the following
guidelines when writing a will and planning on the distribution of
- Make sure your will specifies executors, guardians and
trustees. Don't forget to get a living will, too (health care
directive), to make sure loved ones know whether you want to be
kept on artificial life support. Similarly, you should designate a
power of attorney – someone authorized to manage your affairs,
typically financial ones, if you're not able to handle them
- Pay it forward. Purchase adequate life insurance for
yourself now to help your family avoid financial pitfalls later.
Having the right amount of coverage will help ensure that the
dreams you have for your family will be realized even if you're
not there to witness them. Determining how much life insurance to
buy can be complicated, so it often helps to seek assistance from
an insurance agent or other financial advisor. Also, remember to
periodically review the beneficiaries you name in your policies –
both personal and work – because these can change due to death,
divorce or other life-changing circumstances.
- Make a list, and check it twice. Draft a document
listing all key financial information (e.g.,
checking/savings/investment account numbers, mortgage, insurance,
etc.), and specify where important non-financial information and
valuables (e.g., birth/marriage certificates, titles/deeds for
houses/cars, jewelry, safe deposit keys, etc.) are located. Don't
forget to include contact information for all the professionals
who help with your financial and legal affairs (e.g., insurance
agent, attorney, accountant, etc.).
- Rest in peace. Determine your final arrangements (e.g.,
burial or cremation, where you want to be buried, whether or not
you want to be an organ donor, etc.), write them down and make
them known to family and close friends.
friction within a family like the division of a relative's estate.
Even when there is a written will, there will be family members who
believe they deserve particular items or a share in the inheritance
matter what the deceased had decreed. That is
why it's imperative that language in a will is clear and
straightforward, particularly when it comes to grandchildren.
The worst thing a grandparent can do is stipulate that a
particular percentage of the estate goes to "my grandchildren." Does
that include grandchildren who have yet to be born at the time of
the grandparent's death, and, if so, does the executor hold on to
the money until it is certain that the last grandchild has been
born? If a grandchild has passed away before the grandparent, does
that child's estate receive a share of the grandparent's estate?
"You want to avoid any ambiguity in the language," says George
Cassar, an estate planning attorney with Maddin Hauser Wartell Roth
& Heller PC in Southfield, Mich. "You need to be very clear and
The grandparent should firmly state his intentions. For example,
the grandchildren's portion of the estate could be left only to all
grandchildren alive at the time of the grandparent's death. Or the
grandchildren could be named specifically. If the grandparent wants
to leave a legacy to unborn grandchildren, that, too, can be
However, says Brette Sember, author of Seniors'
Rights: Your Legal Guide to Living Life to the Fullest
(Sourcebooks, 2004), stepgrandchildren are not legally considered
grandchildren unless they are legally adopted by your child. "If you
want to leave something to them [stepgrandchildren], all you have to
do is specify what and to whom," Sember says. "It's like leaving a
bequest to anyone."
Grandparents should also be
aware of the various taxes and laws involved with estate planning.
In 2006, the estate tax will affect anyone with an estate assessed
at $2 million upon death. In 2009, the assessment goes to $3.5
million; in 2010, the estate tax disappears for a year, and in 2011,
it returns at $1 million (all of which is subject to change,
depending on Congress). There is also a generation skipping transfer
tax, which follows the
same assessments as the estate tax. The
skipping tax comes into play when a generation is skipped, such as a
grandparent leaving money to a grandchild but not to the parent in
If the estate is large, grandparents may want to consider other
options for their grandchildren, says Todd Simpson, a former trust
officer who is now an attorney at the Michigan-based firm Warner
Norcross & Judd LLP.
"Under current law, a grandparent can pass up to $12,000 a year
to a grandchild without being taxed," says Simpson. That is $12,000
per grandparent, he adds. If Grandma and Grandpa are married they
can jointly provide a tax-free gift of up to $24,000, according to
Some grandparents want to leave a gift for a specific reason,
such as to be put toward a grandchild's education. Or they might be
concerned that money given to the child might be spent by the
parents. In this case, Cassar says grandparents should consider
setting up a trust fund that designates when and how the grandchild
can use the money. The grandparent also can control who handles the
No matter how the grandparent decides to set up the estate,
experts recommend using an attorney who specializes in estate
"Estate law is really a game of words, and it's important that
you have someone who knows the rules," says Sember. "Different
states have different rules, so it is really important to see an
attorney who can do this for you the right way."
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