Isn’t it odd how becoming a parent prompts us to think about our own mortality? As new parents, we worry about what will happen to our child if something happens to us. If you are a parent, you probably spend a considerable amount of time when your children were young developing an estate plan that protected and provided for them in the event of your death. Now that they are adults, however, that same plan probably doesn’t work as well. Now you need to focus on how to leave assets to your adult children. The Grand Forks estate planning attorneys at German Law Group offer some common options for leaving assets to adult children.
Factors to Consider When Leaving Assets to Adult Children
Before you can decide what estate planning tools and strategies to use when leaving assets to your adult children, you need to take some time to consider some relevant factors, such as:
- Fair vs. equal gifting – parents are often torn between the obligation to gift equally and the desire to gift fairly. In reality, equal gifting often does not make sense for a variety of reasons. Your children may have very unequal needs and/or you may have good reason not to gift equally. Try not to get bogged down on obligatory gifting and, instead, focus on fair gifting.
- Family business assets – if you own a small business that you plan to pass down to any, or all, or your children you need to include business succession planning in your estate plan. Simply gifting the business after your death can dramatically reduce the odds of the business making a successful transition to the next generation.
- Spendthrift beneficiaries – most families have a spendthrift. Be honest with yourself and identify any spendthrift beneficiaries before you start on your estate plan.
- In-laws – if your children are married, keep in mind that your son/daughter in law could end up with the assets you gift your child unless you make provisions in your estate plan to prevent that from occurring.
- Addictions and mental health – you also need to take into account any addictions or mental health issues your children may have when deciding what and how to gift them.
- Special needs beneficiaries – if any of your children have special needs, it is imperative that you include special needs planning in your estate plan. Outright gifts could lead to disqualifying your child for much-needed assistance programs such as Medicaid and Supplemental Security Income (SSI).
Tools and Strategies for Leaving Assets to Adult Children
Every estate plan is unique. As such, you will need to consult with your estate planning attorney to decide which tools and strategies work best for your situation. Many parents, however, choose to make outright, one-time gifts in their Last Will and Testament. Leaving assets in your Will is a simple and straight-forward method; however, it could be months, even years, before your children actually receive the assets if your estate is required to go through formal probate.
Using a trust to leave assets to your adult children is another option. This allows you to stagger the gifts you leave so that young adults do not receive a large lump sum all at once before they are mature enough to handle it. In addition, trust assets bypass the probate process, allowing them to be distributed as soon after your death as you wish.
Yet another consideration is lifetime gifting. There are a number of advantages to gifting assets to your children while you are still alive. Along with the ability to be here when your children receive the gift, a lifetime gift may also provide tax-avoidance benefits if the gift qualifies for the yearly exclusion for federal gift and estate tax purposes. Transferring assets now can also help you if you ever need to qualify for Medicaid to help cover the high cost of long-term care because those assets could put you over the Medicaid asset limit.
Contact Grand Forks Estate Planning Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about how to leave assets to adult children in North Dakota, contact the estate planning attorneys at German Law Group by calling 701-738-0060 to schedule an appointment.