Often, when people do their estate planning, they include their grandchildren only as alternative beneficiaries. That means that they receive an inheritance only if their parent (the grandparent's child) dies before the grandparent. Even if someone dies without a will and has no living children, grandchildren will receive the assets that would have gone to those children.
Some Californians choose to include provisions in their will to designate inheritances specifically for their grandchildren. They may want to provide for their education. That can also be accomplished by setting up a College Education Savings Plan (commonly known as a 529 Plan).
Some people trust their grandchildren to spend the money more wisely than their parents would. They may also be concerned that their grandchildren's parents won't have anything to leave them.
Regardless of the reason for making your grandchildren primary beneficiaries, doing so requires skilled planning and knowledge of California's estate laws to ensure that your intentions are codified accurately.
When leaving money or other assets to a minor, there are special procedures that need to be followed. Many people open a Child Uniform Transfer to Minors Act account. The assets in a CUTMA account can be used only for the minor's benefit. The minor is the owner of the account, but the account is managed by a designated custodian. When the minor reaches 18 or another designated age, the custodian is required to close the account and give the funds to the owner.
When grandparents want to leave a sizable amount of money or property to a minor, it's generally best to set up a trust. Unlike with a CUTMA account, a separate trust is not necessary for each child. In addition, the assets don't have to be given to the child when he or she reaches a particular age. Grandparents can designate when and how much of the money will be distributed. They can make changes if they feel as their grandchildren get older that they aren't yet ready for the responsibility of handling the assets in the trust.
Your California estate planning attorney can provide more detailed information about your options for bequeathing money and/or other assets to your grandchildren and discuss the pros and cons of each option based on your unique situation.
Source: Lake County News, "Estate Planning: Gifts and inheritance for grandchildren require planning," Dennis Fordham, Jan. 07, 2017