Some people going into the estate planning process know a little about inheritances. Some of these people believe that as long as they make a last will and testament and state how they want their children to inherit property, that’s all they really need to do.
While creating a will is one way to leave your adult children inheritances, it isn’t always the best way. There are several options you may want to consider if you’re planning on passing on your property after you die.
Create a trust.
If you choose to create a trust, you effectively give the inheritance that would’ve gone to your children to the trust instead. This means the trust becomes the legal owner, and not the children, even though the children still get to benefit from the property the trust owns. There are many kinds of trusts you can create, some of which have some significant tax, financial planning, and asset protection benefits.
Distribute through installments.
One popular inheritance method is leaving children a lump sum of cash or assets. While this is commonly done, you might also want to consider giving installments. Providing regular gifts every year, every several years, or at other intervals could be far more beneficial and help ensure that inheritances are not squandered.
Give living gifts.
Living gifts—property you give to your children while you and they are still alive—also have some significant benefits, especially if you have an estate that is large enough to be subject to the estate tax. There are specific limits on the amount you can give each year and not be subject to additional taxation, so you’ll need to speak with your estate planning lawyer about details.