Estate Planning for Pennsylvania Grandparents

Simply put, the main purpose of estate planning is to pass on as much of your wealth to your heirs as possible. The vast majority of estate planners have grandchildren they love deeply. Planning for grandchildren is different than planning for children, though. Many grandchildren are still minors or just became adults when their grandparents start getting serious about estate planning. 

Some grandparents do not have their grandkids’ names in their estate plans, as they believe their inheritances could be managed best by their parents. Before sitting down with your attorney to come up with your estate plan, ponder the nature of your relationship with your grandchildren and what’s important to everybody. Below are some tips for optimizing your estate plan as a grandparent. 

Paying For College

The tuition costs of higher education have more than tripled over the past three decades. As a result, an increasing number of grandparents have earmarked their grandchildren’s inheritances to help pay for college. Leaving money for college in a Will might not be sufficient.

The Role of Trusts in Grandparents’ Estate Plans

Even though 18-year-olds are legally adults, they are not always responsible with money—much less a sudden windfall of cash. One solution is to create a trust and fund the trust with the grandchild’s inheritance. Trusts allow grantors (trust creators) to stipulate how the funds will be given. 

For example, the trustee can be instructed to only use the money for college tuition. Other times, the beneficiary will receive money at certain milestones (turning 18 or 21, graduating high school or buying a house). Besides providing grandkids with resources to go to college, trusts can also incentivize such beneficiaries to actually graduate. 

Estate and Inheritance Taxes

As of September 2021, the federal estate tax is $11.7 million per estate. This relatively high threshold, which is always subject to change, allows more than 99 percent of estates to pass through probate without owing any estate taxes. Pennsylvania has no estate tax itself, but it does impose an inheritance tax on beneficiaries and heirs. 

The inheritance tax rate differs based on the specific relationship between the heir and estate planner. For heirs with a direct lineage (like children and grandchildren), the rate is 4.5 percent on direct transfers. 

During an estate planner’s lifetime, he or she may gift a certain amount of money each year to heirs. Up to $15,000 may pass from person to person without having to file a form with the IRS. The lifetime gift exemption is identical to the federal estate tax exemption ($11.7 million). So, to either avoid or minimize the Pennsylvania inheritance tax, estate planners may gift a portion of their estate to their loved ones each year. 

Focus On the Longer Term

Done effectively, estate planning is sure to put your family in a solid position for years to come. As a grandparent, you have a special bond with your grandchildren. Writing a legacy they can benefit from is a powerful way to let them know you’ll always care for them. The experienced team at HighPoint Law Offices can help you make that happen. Let us know how we can help today.

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At HighPoint Law Offices we support individuals, families, and businesses of all backgrounds with estate planning services that address their unique wishes, goals, and challenges.

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