4 Advantages of a Generation Skipping Trust

A generation skipping trust is a type of trust that an individual can utilize in order to pass their assets on to their grandchildren and skip their children. Your property will go into the ownership of a trust and they will be held until your grandchildren are ready for. Here are some of the advantages of using a generation skipping trust.

1. Provide for the Grandchildren

One of the biggest benefits of using a generation skipping trust is that you can provide for your grandchildren. With this type of trust arrangement, you can set aside a certain amount of your estate into the trust. Then, it will bypass your children and will be available for the next generation of your family. Many grandparents love the idea of being able to somehow provide for their grandchildren when they become adults. The generation skipping trust is an ideal tool to be able to do so. 

2. Compound Interest

With this estate planning tool, individuals can take full advantage of the power of compound interest. With this strategy, you can put any financial assets that you have into it. For example, if you own a portfolio of stocks and shares of mutual funds, you could put this into the ownership of the trust. In many cases, it will be several years before the grandchildren are ready to take over the assets in the trust. This allows the assets in the trust to grow thanks to compound interest. The value of the assets in 20 or 30 years could potentially be much greater than their present value. This means that not only will you be able to provide for your grandchildren, you will be able to provide a substantial amount of money and other assets. 

3. Help Children avoid Taxes

In some cases, it may be important to help your adult children avoid extra taxes. If you have a substantial estate, they may not necessarily want access to it because it will increase the amount of taxes that they have to pay. For example, they might have to pay estate taxes if your estate is over a certain amount of money. When you put all of your assets into a generation skipping trust, they will be removed from your estate. Since the assets are skipping your adult children, they will not have to worry about paying taxes on this amount.

4. Control

Another benefit of using a generation skipping trust is that you will have complete control over what happens to your assets. Many people fail to take the necessary steps to plan ahead. When they die, all of their assets go into the probate system because they did not make the proper plans. They might have wanted their grandchildren to be able to get something out of their estate, but the court systems will most likely not award them with anything. Instead, they will give the majority of the assets to your children. 

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