Multigenerational Estate Plans: Communication Is Key

Older man carrying grandson on shoulders

When people create an estate plan, they want to plan for the future and meet the needs of their family. This includes not only their children but also their grandchildren, and even their great-grandchildren. But many estate plans fall short of covering the needs of future generations – and it often comes down to a lack of communication.

Each generation typically completes their own estate plan, the managing directors of The Lerner Group point out in a Forbes article titled “Your Legacy: How To Create a Multigenerational Estate Plan.” But that planning is often not enough to ensure wealth is protected for future generations.

Family needs can change over time

JR Gondeck and Vanessa N. Martinez of The Lerner Group note that estate plans may be inadequate if they are more than a couple of years old.

Life events can change family needs, they said. Examples include divorce and the birth of children. Successor trustees may need to be changed. That’s why they stress the importance of communication for multi-generation estate planning.

When a child is born, it’s an exciting time for the whole family. Both parents and grandparents start thinking of the child’s future. Gondeck and Martinez point out that parents often start planning for college while grandparents start thinking about making monetary gifts. There are many options available for both, they said, citing 529s, UTMAs/UGMAs, and gift trusts as examples.

But typically, parents and grandparents don’t communicate. Grandparents send a check for their grandchildren. Parents are already feeling overwhelmed and more often than not, simply open a UTMA/UGMA or 529 college savings account. But as money accumulates each year and family wealth grows, these account types may not be optimal.

An effective multigenerational estate plan considers questions about the future, even decades in advance, say Gondeck and Martinez. Some of these questions include whether they want their child to have access to wealth at age 18. Another is, "what will happen if the child gets a scholarship or decides not to go to college at all?"

Overcoming communication barriers

Many times, the best solution is a gift trust. It can be structured so that the grantor makes the gift and also pays the taxes on behalf of the trust. This option protects wealth and provides tax-free benefits for the child.

Gondeck and Martinez cite three common reasons for a lack of communication between generations:

  • People don’t want their children or grandchildren to know how much money they have.
  • People don’t want their parents or grandparents to know how much money they have.
  • They don’t know to facilitate multigenerational communication.

An estate planning lawyer can guide you down the right path

One approach to resolving these issues is to work with an estate planning lawyer. An attorney will understand the wealth and circumstances of each generation and can guide family members through communication concerns. The attorney can then help the family create a plan that helps ensure wealth is protected for future generations.

Attorney Yuka Hongo works with families in Hawaii and Japan to help them prepare for the future and create plans that meet their needs. Learn more about how she can help. Contact our office to schedule a consultation.

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