If Grandma raised you, you help to support her, or you just want to honor her in your estate plan, you may be wondering whether you should name Grandma as your beneficiary. Of course, you can name her as a beneficiary; however, there are some considerations.
- The Nursing Home
Will Grandma need governmental assistance to pay for a nursing home? If so, then your gift will disqualify her, if given outright. Instead, you can pass assets in a trust for her benefit. The trust will pay for things that governmental assistance does not pay for.
- Asset Protection
Outright gifts can be taken by Grandma’s creditors and divorcing spouse. Instead of handing Grandma a wheel barrel full of money, pass assets to her in a treasure chest (i.e. lifetime individual trust share.)
- Retirement Accounts
When you pass your retirement account to a beneficiary, that beneficiary can elect to stretch distributions out over his or her entire lifetime. A tax deferred stretch out is very effective in building a significant sum. Because Grandma’s life expectancy is likely much less than your other beneficiaries, consider passing retirement assets to younger beneficiaries and giving Grandma something else.
If you and Grandma have federally taxable estates or if your states of residence have an inheritance tax (Florida does not), your assets are likely to be taxed twice within a relatively short period of time.
- Personal Gifts
Consider giving Grandma a personal gift such as a letter describing your favorite shared memories, photos, or a video of the two of you together. Use your funds now to spend time with your grandma and create new memories.
If you want to name Grandma as a beneficiary, consult with a qualified estate planning attorney to determine the best way to do it.