For a number of reasons, the government seems to think that family wealth ought to pass from one generation to the next, without “skipping” over anyone. However, that’s not always the way the world works (or the way folks want to distribute their assets)
But what if you want to provide for your grandkids instead of your children?
This is one time when extra planning is crucial to escape a series of tax law traps. As a result, this planning may require a generation-skipping or “dynasty” trust.
The fundamental reason why the government is interested in whether wealth trickles down from generation to generation is, if nothing else, a way to ensure that taxes are paid at each level. Unfortunately, this may not be in keeping with your plans or modern reality. For example, who would have anticipated the student debt so many grandchildren face today?
For whatever reason, you might want to skip a generation in your estate distribution. The estate planning vehicle to accomplish this objective is a trust, specifically a “generation-skipping” or “dynasty” trust.
For more information, check out an article in ProducersWeb titled Generation-skipping Trusts.
While there are many limitations, (and perhaps a growing political battle to further limit such trusts), there are very real gains to be secured for you and your family.