Multigenerational Estate Planning
Multi-generational Estate Planning is the process of acquiring, investing, and building wealth throughout your life and preparing to share the fruits of your success with those you love in order to provide long-term financial prosperity and security for your family. It involves collaboration, coordination, and trust. It also involves developing and maintaining a purposeful and detailed plan, which a financial advisor can help you prepare and communicate to your family members.
Importance of Multigenerational Estate Planning
- Most people, attorneys and non-attorneys alike, think that estate planning is only about who gets your stuff after you are gone. That type of planning only deals with one generation, your kids. It doesn’t need to be so limited. A Legacy Architects’ Estate Plan does much more than protect only one generation.
- Our Estate Plans protect your assets and your legacy while you are alive but disabled, and then when you die they protect your spouse or significant other. (Generation One Protected)
- When the second spouse dies, our multigenerational trusts protect your entire estate in individual trusts for each of your heirs, protecting your legacy from your heir’s creditors, divorce, and catastrophic illness issues. If your child becomes disabled, the trust will hold and protect the assets for your child. (Generation Two Protected)
- If your child dies and your child’s spouse remarries, our trusts prevent your assets from going to this new spouse in the event of divorce or death. It can also prevent your assets from going to your child’s step-children if you want it to. (Generation Two and Three Protected)
- When your child dies, you can have the trust hold your assets and legacy for the benefit of your grandchildren until they reach an age where they can manage it themselves. The grandkids can keep your assets in their separate trusts their whole life, benefiting from creditor and divorce protection. (Generation Three Protected)
- The grandchildren’s individual trust shares from their parents can come with the same divorce, death, and catastrophic illness protection as their parent’s individual trust share. This means upon their death, their trust share will be held for the benefit of their kids, your great grandchildren. (Generations Three and Four Protected)
- And finally, when your grandchildren die, the great grandchildren will receive their share. (Generation Four Protected)
How to address Multigenerational Estate Planning Issues
One has only to look around my neighborhood in Newton, Mass., to see the change. Just down the street, a couple has bought a house across from the husband’s parents. One nearby couple has already added an apartment to their Tudor home while the family next door is adding a carriage house apartment for their parents. And we ourselves recently bought a house with my parents and are now in the process of remodeling it to create two separate but connected living spaces.
Until recently, many towns and cities restricted the creation of a second living space within a home, fearing the erosion of neighborhoods and property values. Pressures created by rising real estate prices, housing shortages and demographics, however, have many rethinking the issue. Newton.
Good planning is critical to the success of these arrangements and to make sure all family members feel respected and included. As an estate planner, I am well aware of the multigenerational estate, tax and financial planning issues that can arise. Thought must be given to who should own the real estate and if title should be taken jointly, in trust, a family partnership, or otherwise. Does an interfamily loan make sense? Will lifetime gifting reduce estate taxes at the expense of capital gains taxes for the children in the future? Are there sufficient assets in the parents’ estate to pay any estate taxes and also provide for other beneficiaries? How does the real estate fit into the context of the overall estate plan and is the plan fair to all the heirs? These helped me address important questions early in the planning process.
Our project, now under construction, will include a separate wing for my parents, connected to our living room by a set of French doors that can be left open or be closed for privacy. Their space will have a living room, master bedroom, bathroom and galley kitchen—all on one floor and with a separate entrance. Most importantly, this new housing arrangement will bring us peace of mind.
How did we navigate the decision-making process? We are a family of planners. Our concern wasn’t financial or even the challenge of finding adequate care as my parents age. My mother, a former CEO of a continuing care retirement facility in Connecticut, has long been well aware of the issues that come with aging. She made sure they had good long-term care insurance, which they will use if they find they need care in coming years.
Estate planning conversations were an important part of the planning. Since we would be owning the home jointly with my parents—now age 69 and 71—the family had to think about how the property would pass to the next generation. Special consideration needed to be given to the inheritance that would go to my brother to make sure that there would be no hard feelings.
If you would like to learn more about the documents you need in estate planning, any one of our estate planning attorneys would be happy to assist you.