• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sinclair Prosser Gasior

Annapolis Estate Planning Attorneys

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Call Now: (410) 573-4818

Attend a Free Workshop Trustee School

  • Home
  • About Our Firm
    • About Our Firm
    • Founding Attorneys
    • Meet Our Team
  • Services
    • Annapolis, MD Asset Protection and Business Planning
    • Estate and Gift Tax Figures
    • Annapolis, MD Elder Law & Medicaid Services
    • Annapolis, MD Trust Administration & Probate
    • Family-Owned Businesses & Farms
    • Annapolis, MD Incapacity Planning
    • Annapolis, MD LGBTQ Estate Planning
    • Annapolis, MD Pet Planning
    • SECURE Act
    • Annapolis, MD Special Needs Planning
    • Estate Planning for Young Families
  • Resources
    • DocuBank
    • Elder Law Reports
    • Estate Planning Definitions
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Asset Protection Planning
      • Estate Planning
      • Frequently Asked Questions for Families Without an Estate Plan
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid
      • Power of Attorney
      • Probate Avoidance
      • Trust Administration & Probate
      • Wills
    • Is Your Estate Plan Outdated?
    • Probate Resources
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Trust Administration
      • Estate Planning for Niches
    • Top 10 Estate Planning Techniques
    • Newsletters
  • COMMUNITIES WE SERVE
    • Anne Arundel County
      • Annapolis
      • Crownsville
      • Davidsonville
      • Highland Beach
      • Millersville
    • Baltimore County
    • Calvert County
      • Dunkirk
      • Huntingtown
      • Owings
    • Charles County
      • Charlotte Hall
      • Waldorf
    • District of Columbia
    • Howard County
    • Maryland
      • Clarksville
      • Columbia
      • Ellicott City
    • Prince George County
      • Bowie
      • Fort Washington
      • Glenn Dale
    • Queen Anne’s County
      • Grasonville
      • Queenstown
      • Stevensville
    • St. Mary’s County
      • Charlotte Hall
      • Leonardtown
  • Reviews
    • Our Reviews
    • Review Us
  • BLOG
  • Contact Us
  • Make A Payment
  • Client Portal
Home / General / Leaving an Inheritance to Grandchildren

Leaving an Inheritance to Grandchildren

February 20, 2020 by Alexander M. Pagnotta, Estate Planning Attorney

Leaving money to a grandchild can be more complicated than it appears at first glance. Here are some of the frequent questions that come up during my consultations, along with factors to consider.

Q: Can I just name my grandchild as a beneficiary on my life insurance policy?

A: You could, however this could make things more complicated when you pass away. For example, if the grandchild is under 18, they will need an adult guardian to manage that property until the child reaches age 18. This can result in a longer Estate Administration process and even a court guardianship proceeding for the minor child. Things can also get trickier if the minor grandchild has parents that are divorced. The end result is that your money could be managed by someone that you never intended.

Q: My grandchildren are all in college, so can’t I just name them as a beneficiary on one of my accounts?

A: Yes – but there may be a better way. The first thing to consider is how much the grandchildren will receive as a direct beneficiary of the asset. If the asset is a life insurance policy with a death benefit of $100,000, it may not be advisable for your grandchild to inherit a large lump sum of money for a variety of different reason. First, if they have creditors or delinquent student loans, then they can take a bite out of the money you left for your grandchild. Second, if they get a divorce and the assets are comingled with the divorcing spouse, then that spouse can take a chunk out of the money you left specifically for your grandchild. Third, they may spend the money quickly on an expensive purchase and fail to invest any of the inheritance. These issues may be preventable with a Revocable Living Trust.

Q: Can I add a provision in my Last Will and Testament to leave money to my grandchildren?

A: Yes. However, a secondary issue to consider is that if you have assets in your sole name when you pass away, then there will first have to be a court probate process. Your Personal Representative would have to get approval from the court to distribute all of the assets to your beneficiaries – including your grandchildren. You should also consider the same factors outlined previously when you add a provision in your will for the benefit of your grandchildren.

Q: If I have a retirement account, like an IRA, 401(k), 403(b), TSP, or other qualified plan, does it change anything in terms of adding a provision for my grandchildren in my Last Will and Testament or Living Trust?

A: Yes. As of January 1, 2020, the SECURE Act was passed. Under this new law, most designated beneficiaries of an IRA or other qualified plan must take all distributions from the plan by the end of the 10th year after the death of the plan participant. The old general rule was that a beneficiary can stretch the required distributions out over their life expectancy, thereby reducing the amount of income tax that they would pay each year. Therefore, the SECURE Act accelerates distributions over a 10 year period for most beneficiaries. However, one big exception to the 10 year rule is when the owner of an IRA designates their own child under the age of majority (or in most cases their child’s sub-trust) as a beneficiary of the IRA. In this case, their own child is able to use their life expectancy with regard to required minimum distributions until they reach the age of majority. What this means, is that there would be less income tax owed each year. When the child reaches the age of majority, the 10 year rule applies. Therefore, if a minor grandchild is receiving a qualified Retirement Account either through direct beneficiary, a Last Will and Testament, or Living Trust, the 10 year rule applies because they are not a child of the owner of the qualified Retirement Account. It may be a good idea to speak with an Attorney at Sinclair Prosser Gasior to assist you with your estate plan as a result of this new change in the law.

Q: What is the best way to leave money or assets to grandchildren?

A: One of the best ways is using a Revocable Living Trust. The first thing to consider is the age of the grandchildren and their financial maturity. After that, you should then consider the age in which you would want them to manage their own money. Finally, you should consider who you would want to be in charge of that grandchild’s money until they reach the age that you have designated. To illustrate, a grandparent could establish a sub-trust under their Revocable Living Trust for the benefit of their grandchild. They want the grandchild to be in charge of their money at age 30. Prior to age 30, they appoint the grandchild’s father as the trustee to manage the money until they reach age 30. They also appoint a backup trustee in the event the grandchild’s father is unable to serve as trustee. This strategy allows you the most control, it keeps the money within your bloodline, it can offer protection in the event your grandchild gets a divorce, and you get to specify who you would want to receive the money if your grandchild passes away.

  • Author
  • Recent Posts
Alexander M. Pagnotta, Estate Planning Attorney
Alexander M. Pagnotta, Estate Planning Attorney
Estate Planning Attorney at Sinclair Prosser Gasior
Alex Pagnotta’s personal experience with the problems that can result from an inadequate estate plan along with his interest in helping others drove his desire to pursue the areas of estate planning and estate administration. He counsels individuals and families to preserve wealth and ensure that their hard earned assets are passing to the correct individuals when they want and how they want.
Alexander M. Pagnotta, Estate Planning Attorney
Latest posts by Alexander M. Pagnotta, Estate Planning Attorney (see all)
  • What Happens with my Car at my Death? - January 24, 2023
  • What Do Executors Need to Know? - December 15, 2022
  • Patagonia Founder Gives Away His Company - November 1, 2022

Filed Under: Estate Planning, General Tagged With: Inheritance Planning

Other Articles You May Find Useful

Annapolis probate attorney
How Social Media Posts Might Impact a Will Contest
Bowie estate planning attorneys
Can I Prevent Someone from Contesting My Will?
Estate Planning Mistakes
living trust
Three Things a Living Trust Won’t Accomplish
What is the Most Important Estate Planning Document?
Tax Law Changes for 2022

Primary Sidebar

Download our free estate planning worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.
  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

Testimonials

5 Stars
Client Review
September 3, 2020
    

We initiated estate planning following a presentation by Sinclair Prosser Attorney Jon Gasior. We were so impressed, we contracted with them to complete our estate planning. Subsequently, we assembled information on our assets and Sinclair Prosser Gasior did the rest. Correspondence was communicated to our financial institutions and the estate was established. We were very pleased with the courteous manner of the Sinclair Prosser Gasior staff. However, it was their professionalism that made us satisfied we chose this firm to handle our estate. We have nothing but praise for Sinclair Prosser Gasior .

default image
– Walter K.

Blog Subscription

Sign up for our blog to receive all of our latest estate planning news and updates!
  • This field is for validation purposes and should be left unchanged.

ANNAPOLIS

900 Bestgate Road
Suite 103, Annapolis, Maryland 21401
Phone: (410) 573-4818
Fax: (410) 573-2802

BOWIE

4201 Mitchellville Road
Suite 403, Bowie, MD 20716
Phone: (301) 970-8080
Fax: (410) 573-2802

MILLERSVILLE

1520 Jabez Run Rd
Suite 300, Millersville, Maryland 21108
Phone: (410) 573-4818
Fax: (410) 573-2802

WALDORF

Hamilton Centre II
3261 Old Washington Road, Suite 2020 Waldorf, MD 20602
Phone: 800-366-4615

Map

map for office

Footer

footer logo
  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

The information on this Maryland Attorneys & Lawyers / Law Firm website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

© 2023 American Academy of Estate Planning Attorneys| Privacy Policy | Contact Us | Disclaimer | Site Map