Grandparents in North Carolina can utilize tools in estate planning to provide for their grandchildren, ensuring the passage of their legacy in the future. The strategy for estate planning may include factors such as the age of the grandchildren, the size of the grandparents’ estate, and potential tax consequences.
Grandparents can give their children an inheritance while they are alive. A single grandparent can gift up to $15,000 per year to each grandchild without incurring federal tax penalties, while a pair of grandparents can gift up to $30,000 per year. Such gifts made during the grandparents’ lifetime effectively remove property from their estate, potentially reducing their estate tax liability after death and allowing them to experience the joy of seeing the impact their estate planning has on their grandchildren. In addition to being a key part of an estate plan, gifts used towards medical care or educational expenses are exempt from gift tax, regardless of the amount, as long as they are made directly to the institution or medical provider.
With an incentive trust, grandparents can give while incentivizing or discouraging certain behaviors by imposing restrictions on the trust property. For instance, a grandparent may specify that the trust funds can only be used for education, buying a home, or pursuing entrepreneurial endeavors. Alternatively, they may decide their grandchildren will not receive trust funds if they refuse employment, have credit issues, or develop substance abuse problems.
Grandparents can decide when their grandchildren will receive the funds from these trusts. They can choose a specific age or set intervals for disbursing the funds. It’s important to remember that estate planning takes time, but the earlier grandparents start, the more time they’ll have to see their plan become a reality.