ESTATE PLANNING: Helping out the grandkids

2012-09-30T00:00:00Z ESTATE PLANNING: Helping out the grandkidsChristopher W. Yugo Times Business Columnist
September 30, 2012 12:00 am  • 

Q: I would like to establish a trust for each of my grandchildren, but I’m concerned about the cost. Is there a way to set up a trust for them without a lot of expense?

A: My first question is do you want to set up the trusts now or at the time of your death? If you wish to establish the grandchildren’s trusts after your death, you can simply create them in your estate plan.

For example, you can leave money to the grandchildren in trust by creating a testamentary trust in your will. You simply designate the amount or percentage to be held in trust for them and set the terms. Upon your passing, the bequest funds the trust and you are all set.

You can use the same procedure if you have a revocable living trust. Rather than leaving the money directly to them, you leave it to them in trust. And the cool thing about using a revocable living trust is there is likely already a provision there.

Most revocable living trusts provide that if a beneficiary is under a certain age, the money is left in trust for them until they turn 21 or 25 or whatever age you choose. You may need to tinker with the language a little bit, but the trust provision likely already exists in the document.

On the other hand, if you wish to establish a trust during your lifetime, you’ll need to create a free-standing trust agreement. You should be able to create one trust agreement that can establish multiple trusts for the grandchildren.

Because of some gifting issues, the trust will require some special planning so that the gifts are completed. However, your attorney should be able draft the document and advise you properly so that those hurdles are addressed.

You are right that establishing a separate trust will be more expensive than using a will or revocable living trust. You are after all, adding another sophisticated document to the mix.

Another option will be to use the Indiana Uniform Transfer to Minors Act. IUTMA allows a person to make a gift to a minor by delivering it to a custodian who will manage it until the minor turns 21. The custodian has flexibility to spend the money for the minor’s benefit for things like education and health care. However, it places a responsible adult between a pile of money and a kid.

Since IUTMA is statutory, it isn’t sophisticated in its approach and you can’t really choose the terms regarding distributions. However, for simple gifts that you want to keep out of the hands of a youngster, it’s a great option. You also can’t beat the price.

Opinions are solely the writer's. Christopher W. Yugo is an attorney in Crown Point. Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to . Yugo’s information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.

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