If you want your grandchildren to inherit some of your money

There are ways to do it, but it can get complicated. Also: We answer a reader's question about spousal benefits for Social Security.

  • By Glenn Ruffenach,
  • The Wall Street Journal
  • Estate Planning
  • Family Conversations
  • Financial Planning
  • Estate Planning
  • Family Conversations
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Q: You recently wrote about estate planning and leaving a “legacy.” I have a more specific question: Should I include my grandchildren in my inheritance plan? Most people seem to leave everything to their adult children, but I know some couples who are naming both children and grandchildren as beneficiaries.

A: A difficult question, with no single, correct answer. Thanks to longevity gains, many grandparents these days are more involved in their grandchildren’s lives, simply because they have more years to spend with them.

There is one possible downside to being a generous grandparent: Your children may view bequests to your grandchildren—particularly if the latter can spend the money before they finish college—as usurping their parental authority. What’s more, grandchildren receiving a hefty inheritance at an early age could wind up rudderless. Or as one financial adviser told us: “When your goal in life is to not screw up what you have, as opposed to seeing what you can build and create yourself, it doesn’t promote high self-esteem.”

In short, to keep your benevolence from backfiring, tell your children what their children could be getting as an inheritance, and ask how your children feel about it. One possible strategy is to pass money to a grandchild through a trust fund for which the child’s parent is one of the trustees.

And again, it’s critically important to put some thought into the age at which your grandchildren would get control of the money. You may want to wait to hand over any funds at least until they are in their early 20s, or parse it out gradually, letting them use part of it to pay, say, college bills. I trust you have a good relationship with your grandchildren, as do many grandparents. But having Jack and Jill inherit a pile of money before their professional lives have even begun likely wouldn’t help anyone.

A final note: Transferring personal belongings to heirs—a favorite baseball glove, a treasured photo, a collection of vinyl records—often can be more challenging, given the sentimental value, than doling out financial assets.

So, before you give the pocket watch that’s been in your family for three generations to your grandchild, spend some time with a resource we have highlighted previously: “Who Gets Grandma’s Yellow Pie Plate?” This invaluable program, developed by educators at the University of Minnesota, can help families pass along personal possessions with, ideally, little conflict.

Q: My question is about Social Security and spousal benefits. My wife started collecting her Social Security ($500 a month) at age 62. She is now 69. I am 59 and hope to start collecting at age 66. Can she collect any of my benefits until I retire?

A: No, she wouldn’t be able to do this.

This question pops up fairly frequently. Your wife will become eligible for a benefit based on your earnings record when you file for Social Security, and not before. (The same holds true, of course, if the roles were reversed.) Here’s how the Social Security Administration explains the rule on its website:

“Even if you have never worked under Social Security, you may be able to get spouse’s retirement benefits if you are at least 62 years of age and your spouse is receiving retirement or disability benefits.” (The emphasis is mine.)

Your wife fulfills the first requirement—she is at least 62. But the second requirement is the problem in your case. The fact that you aren’t receiving benefits means your wife, for now, isn’t eligible for a spousal benefit.

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