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What is a generation-skipping trust?

If you are taking a fresh look at your estate plan in Texas, you know that even the best plan can stand to use a facelift now and then. Life changes not just on your end but on your relatives' ends can make this so. Perhaps you have grandchildren now that you didn't have when you established your current plan. Maybe one of your children has gotten married or even divorced and then remarried. These are just some of the situations that may make you want to take a new look at things.

One thing many people are concerned about is how to avoid money falling into the hands of a spendthrift heir. If that heir is your child but you want to make sure something is left for your grandchildren, a generation-skipping trust may be able to help you. As Forbes explains, by putting assets into a generation-skipping trust, you can bypass estate taxes on those assets. You can also leave assets directly to your grandchildren and literally bypass your children altogether.

If, however, you want to allow for some financial benefit to your children while ensuring something is left for your grandkids, this type of trust may still be used. You can set it up so that your children receive active income from the assets but the ultimate balance goes to your grandkids.

This information is not intended to provide legal advice but is intended to help Texas residents understand one of their options for providing for their grandchildren through estate planning.

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