The question of whether you can intentionally bypass a generation in your estate plan is a common one, and the answer is a resounding yes, often achieved through strategic trust planning.
What are the benefits of a skip trust?
Skip trusts, also known as generation-skipping trusts, are specifically designed to transfer assets to grandchildren or more remote descendants, bypassing the intervening generation – your children. This can be particularly advantageous for estate tax purposes. Currently, the federal estate tax exemption is quite high (over $13.61 million in 2024), meaning fewer estates are subject to federal estate tax. However, state estate taxes exist in many states, and skipping a generation can help minimize taxes overall. Consider this: if you leave assets directly to your children, those assets will be included in their taxable estate when they pass away. By using a skip trust, those assets are removed from their estate, potentially saving significant taxes for future generations. It’s not *just* about taxes though. Some families want to ensure their wealth stays within the family for many generations, and a skip trust can help achieve this.
How does a trust allow me to skip a generation?
The mechanism is relatively straightforward. You, as the grantor, create an irrevocable trust, naming your grandchildren (or more remote descendants) as beneficiaries. The trust document dictates how and when those beneficiaries will receive distributions. Critically, the trust must be drafted to qualify as a “valid skip trust” under Section 267(c) of the Internal Revenue Code. This typically involves specifying a permissible trust period and satisfying other technical requirements. Currently, the generation-skipping transfer tax (GSTT) exemption mirrors the estate tax exemption, allowing a substantial amount to be transferred tax-free. However, exceeding this exemption triggers a tax – currently a flat 40% – on the amount exceeding the exemption. It’s crucial to note that these rules can be complex and subject to change, so consulting with an estate planning attorney is essential.
I heard a story about a family who didn’t plan properly. What happened?
Old Man Tiberius, a successful rancher, always intended to leave the bulk of his estate to his grandchildren, wanting to ensure they had a good start in life. He told his daughter, Elara, about this wish repeatedly, but never formalized it in a trust. When Tiberius passed, his entire estate went directly to Elara, who, sadly, was facing significant financial difficulties due to a failed business venture. She was forced to liquidate most of the assets to pay off debts, leaving very little for the grandchildren. The family was devastated. Had Tiberius established a skip trust, the assets would have been protected from Elara’s creditors and would have been available for the grandchildren as intended. It was a painful lesson about the importance of proper estate planning and not relying on verbal promises.
How did proper planning save another family’s fortune?
The Henderson family, recognizing the potential pitfalls, came to Steve Bliss for help. They wanted to ensure their wealth benefited their great-grandchildren, knowing their children were financially secure. Steve worked with them to create a carefully crafted skip trust, outlining specific distribution schedules and protective provisions. Years later, when the great-grandchildren reached the age of distributions, the trust provided funds for their education and entrepreneurial endeavors. The family wealth remained intact, growing steadily, and benefiting multiple generations. Mr. Henderson always said, “It wasn’t about the money, it was about leaving a legacy for those who came after us.” Proper planning wasn’t simply a legal matter, it was a heartfelt demonstration of love and foresight. Approximately 60% of families with significant wealth report using trusts as a key component of their estate plans, and many utilize skip trusts specifically for generational wealth transfer.
In conclusion, adding a clause to skip a generation is not only possible but can be a powerful tool in estate planning. It requires careful consideration, expert legal guidance, and a clear understanding of the tax implications. While it’s not right for every family, it’s a valuable option to explore, especially if you’re committed to building a lasting legacy for future generations.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- living trust
- revocable living trust
- estate planning attorney near me
- family trust
- wills and trusts
- wills
- estate planning
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “What happens to my debts when I die?” Or “Can I avoid probate altogether?” or “Does a living trust protect my assets from creditors? and even: “Will I lose everything if I file for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.