There are many different financial instruments utilized in the field of estate planning. To understand your options and which are most appropriate for you is one of the reasons it is important to work closely with an experienced legacy planning attorney. Estate planning is not a one-size-fits-all proposition so the optimal course of action will vary depending on the specifics of your estate.
The estate tax is a source of great concern for many people. It can truly have a devastating financial impact on succeeding generations of your family. Many of the strategies that estate planning attorneys employ are implemented in an effort to gain estate tax efficiency. This often includes the utilization of certain specialized types of trusts.
One of these is the generation-skipping trust. Envision a scenario where you leave an inheritance to your children that is taxable. Assuming they are successful in their own right they will be leaving a sizable taxable inheritance to their children plus the value of the bequests that you left them. At this point the estate tax would be levied once again, meaning the same resources that were taxed once when you left them to your children would be subject to this federal levy yet another time when your children pass away.
With a generation-skipping trust you name your grandchildren as the beneficiaries, “skipping” your children. That’s actually a misnomer because it doesn’t mean you leave your children “out” of your estate plan. Your children can be beneficiaries of the trust during their lifetime, receiving distributions and otherwise utilizing property that is held in the trust. Your grandchildren inherit the remainder of the trust assets after the passing of your children. You have thus created a generation-skipping plan in that at their death your children would owe no estate tax on the value of the assets in this trust. Taxes have been deferred for decades and two generations benefited from the resources while being exposed to just a single instance of taxation.
The generation-skipping trust is one of many tools in the estate planning toolkit. If you’re interested in some detailed information and guidance based on the unique nature of your own financial assets, simply take a moment to pick up the phone and arrange for a consultation with an experienced estate planning attorney.
Larry Parman
Author, President and Founding Attorney
Parman & Easterday
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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