How to Benefit Your Grandchildren With Smart Estate Planning


Imagine grandparents in a bank setting up a new certificate of deposit. The bank clerk tells them they could leave the money to their grandchildren and avoid probate doing it.

How? Make the account “John and Jane Grandparent I/t/f Grandchild.”

This sounds easy enough, especially since the grandparents still own the money while they are alive. After all, it would be great for their own children for that money to be there to help raise the grandchildren.

Unfortunately, the bank officer’s plan doesn’t work to carry out the goal. With just a little care the grandparents’ plan can happen.

Here is the issue. Parents have legal duties to support their children. The courts decide about what is in the best interest of the child, even if that is in opposition to what parent’s think is in their own best interest. However, even if a Judge agrees, there are limits on what they can decide. Those limits often make no sense, but they are the law.

If the child gets a large sum of money, the law requires that a guardianship hold it under court supervision. While a parent will likely become the guardian to manage the property, that management is subject to court supervision.

The Court’s first duty is to preserve the property of wards. This includes not spending on items that are legal duties of the parent. If you want the gift to help parents raise your grandchildren (better schools, tutors, summer camp, uncovered medical expenses), then avoid guardianship.

A Guardian once called on me to help with this. Their niece, whose parents had died in a car accident, left her a good amount of money in life insurance and other property. This aunt was named the toddler’s guardian. That toddler was now eighteen years old and wanted her money. The Guardian asked me to help convince her to keep it in some sort of account where he could protect her interests as she went to college and grew up a bit more. But, she would have none of it.

The young woman was eighteen with a legal right to an automatic distribution of the money. With her was a twenty-year-old “friend” who was going to help her manage it. The “friend” had a vision of their talent and the young woman’s money with the hope of big returns.

We tried to explain how investment can save and protect capital and get reasonable returns. Our point was this legacy from her parents would best serve her without risk. It could, instead, be set up to help support her for the rest of her life. The sad fact is we were older people who did not know as much as her “friend.”

The young woman asked the Court for an immediate distribution. There was no choice under the law and she got it. I was told later the money was gone inside of a year.

While the bank officer at the beginning was acting in good faith, the Grandparent’s would not like the result of the simple plan. Their own children would not be able to use the money to benefit the kids with better schooling, tutors, nicer clothing and summer camp. Also, those cute little kids would get their hands on it at age eighteen. While there are many young people of that age who are very bright and responsible; the chances are great they would be influenced to squander the gift.


The best alternative is for the grandparents to leave the money to their own child as trustee for the grandchild. Terms of a trust can be very flexible (unlike the strict rules of a guardianship. They can allow the grandchild’s parents to use the money for that grandchild’s benefit. This is even if the money is spent on things the parents would have a legal duty to provide. Also, there is no direct court supervision of the trust’s activity. The court comes into play only if there is a complaint against how the trustee did act. This saves time and expense.

Distribution can be at set ages, not only at age eighteen. Many prefer staged distributions. For example, some at age 18, some at age 21, and the rest at age 25. Some choose schedules like some at age 21, some at age 25 and the balance at age 30. The theory is to allow the child a chance to blow some of the money, and then have most left over to think better about in the future. Your own best judgment controls.

These suggestions also make sense for parents thinking about their own estate planning. Trusts managing property they leave for their children are also important in their plans.


Simple to set up does not usually get the best results. However, good planning and execution makes the best plans easier. Estate planning is the foundation for your family’s future. It needs and deserves the right attention.

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