Saving Estate Taxes for the Benefit of Grandchildren

The "summer" article is a little late this year. I attribute this to extended family gatherings. We don't all stay in the same neighborhood any more. Years ago we drove. Now we fly.

My nephew decided it would be a nice idea to have his wedding in Tahoe on the fourth of July. My son, who arranged to meet us in Reno for a shared car rental, suggested that Mom and I take sufficient carry-on clothing to cover us (literally and figuratively) for the wedding. He predicted a challenging flight.

Our connecting flight was cancelled so we had to fly to Sacramento to make the wedding in time. Our luggage arrived in Sacramento but decided to fly on to Oregon without us, and my son regretted his advice when he and I showed up at the wedding in matching linen suits ( he suspected that everyone thought Mom had dressed us).

I think often of the wit of an elderly passenger, who after a particularly rough flight, said in a rather loud voice to the Pilot on exit: "Sonny, did we land or were we shot down?". But this article is not about airline retaliation. It's about family. Specifically, how to save estate taxes for our grandchildren.

I find that in most estate planning for couples, our primary goal is to protect the estate for the children. Naturally, this includes the elimination or reduction of estate taxes. More often than not the parents are willing to jump through hoops to do this. Having said this, one exception stands out.

When I ask "are your folks living?" frequently the answer is "yes". "Do you know how they intend to leave their estates?" "No". "Would you be willing to find out?" "We would rather not". "Do you realize that they could leave your share in trust, giving you and your spouse the income, as well as access to the assets for your health, education and welfare?" "And that you could make tax free gifts from the trust at any time to your children?" "And all of this would be free of estate taxes in your estate so long as the trust fell below the Generation Skipping Tax Exemption, currently $1,010,000 for each grandparent?" "We are aware of some of this". "Would it bother you to have your share in trust?". "No."

"Now would you be willing to find out about your parent's estate plan?" "We would rather not".

Parents, your adult children are reluctant to ask you about your estate plan. In many cases, while they are planning to save estate taxes for your grandchildren, you may be inadvertently incurring taxes in their estate that could be avoided. In the grand scale of what we will do for our family, I suspect sharing your estate plan may be less painful than flying to family gatherings.

Jack Davidson