Some New York residents decide to create a 'generation-skipping trust" as part of their estate plan. A generation-skipping trust is an estate planning tool that allows a grantor to transfer certain financial assets or property to their grandchildren instead of their children.
When assets are transferred to a grantor's grandchildren instead of their children, the children never own the assets outright. The children's names will not appear on any property titles and they will not be the owners of financial assets. However, the children may have some control over the assets in the trust if the grandchildren are underage. A grantor may also decide to provide some financial benefits for their children in a generation-skipping trust by allowing their children to collect income that is generated by the assets in the trust.
Generation-skipping trusts do not require going through the probate process and may have some tax benefits for the children of the grantor. Because the assets in a generation-skipping trust belong to the grantor's grandchildren, the grantor's children will not have to pay any estate taxes. A grantor may create provisions for how the assets in a generation-skipping trust are to be disbursed in order to prevent young grandchildren from receiving their inheritance all at once.
A generation-skipping trust may be practical for some families but not for others. Some factors that may affect the feasibility of a generation-skipping trust are the number of grandchildren and their ages. A person who is interested in setting up a generation-skipping trust or another type of trust may want to consult an estate planning attorney.