Including grandchildren in your will is worth serious thought for most grandparents, and for many families it’s the right call. How you include them matters far more than whether you do. A direct cash bequest, a trust with conditions attached, a 529 education account, or a custodial account each carry different consequences for taxes, asset protection, and your grandchild’s actual ability to use the money. The right choice depends on the grandchild’s age, whether they receive government benefits, your estate size, and how much control you want over the timing and purpose of the gift.
The Simplest Approach: A Direct Bequest
You can name a grandchild in your will and leave them a dollar amount, a specific asset, or a percentage of your estate. This works well when the grandchild is an adult who manages money responsibly. The limitation is that once probate closes, the inheritance is theirs with no restrictions on how or when they spend it.
Naming grandchildren as contingent beneficiaries is a common middle path. A contingent beneficiary inherits only if the primary beneficiary, usually their parent, dies before you or can’t receive the assets.1Legal Information Institute. Contingent Beneficiary This keeps assets in your family line without redirecting money away from the child it was meant for.
Per Stirpes Versus Per Capita
Two Latin phrases govern what happens when a beneficiary dies before you do, and picking the wrong one produces results that would surprise most families.
Per stirpes, meaning “by branch,” divides your estate along family lines. If you leave equal shares to your three children per stirpes and one child dies before you, that child’s share passes down to their own children, your grandchildren. Each branch of the family receives the same total portion regardless of how many people are in it.
Per capita, meaning “by head,” divides the estate equally among surviving individuals. In the same scenario, only the two surviving children inherit and the deceased child’s kids receive nothing.
If you want grandchildren to step into a deceased parent’s shoes, per stirpes is usually the right language. Spell it out in the will rather than assuming your attorney will default to your preference.
Using a Trust to Keep Control After You’re Gone
A trust gives you control a direct bequest can’t. You decide when distributions happen, what they can be used for, and who manages the money in the meantime. For grandchildren, that control is often the whole reason to use a trust.
Testamentary Trusts
A testamentary trust is created inside your will and takes effect after your death. You name a trustee, set the rules (distributions only for education and medical costs, partial payouts at 25 and the balance at 35, or whatever structure fits), and the trustee follows your instructions. Testamentary trusts go through probate, which means court involvement and some delay before the trust is funded, but once established the trust itself provides years of protection.
Living Trusts
A revocable living trust takes effect during your lifetime and avoids probate. You transfer assets into the trust while you’re alive, keep control as trustee, and specify what happens when you die. Because the trust is already funded, your grandchildren’s inheritance can be managed immediately. Living trusts also keep your estate out of public records. The trade-off is more upfront cost and the work of retitling assets. For families with significant wealth or grandchildren across state lines, the probate savings usually justify the setup.
Special Needs Trusts
If a grandchild receives Supplemental Security Income or Medicaid, a direct inheritance can disqualify them. Even a modest bequest that pushes their countable resources over the limit can cost them coverage they depend on for daily care.
A third-party special needs trust solves this. You fund the trust with your own assets, and because the grandchild never owns or controls the money, it isn’t counted as their resource. The trustee can pay for medical care, education, and personal items that supplement what government programs cover. Payments made directly to third parties for anything other than shelter don’t reduce SSI benefits at all.2Social Security Administration. Spotlight on Trusts
Unlike a first-party special needs trust (which a disabled person funds with their own money), a third-party trust created by a grandparent has no Medicaid payback requirement. When the grandchild dies, remaining funds go to whomever you designated rather than reimbursing the state. The drafting has to be precise. A trust that gives the grandchild too much discretion or that pays money directly to them can undo the entire benefit-preservation purpose.
The Tax Issue Many Grandparents Miss
Leaving assets directly to grandchildren can trigger a federal tax that doesn’t apply when leaving the same assets to your own children. It’s called the generation-skipping transfer tax, and it catches families with substantial estates off guard.
The GST tax applies whenever you transfer assets to someone two or more generations below you, which includes grandchildren when their parent (your child) is still alive.3Office of the Law Revision Counsel. 26 USC 2613 – Skip Person The rate equals the maximum federal estate tax rate, currently 40%.4Office of the Law Revision Counsel. 26 USC 2641 – Applicable Rate That 40% GST tax applies on top of any estate tax, meaning a large direct bequest to a grandchild could face a combined effective rate above 60%.5Congress.gov. The Generation-Skipping Transfer Tax
Each person has a GST exemption that shields a certain amount. For 2026, the exemption is $15 million per person, and married couples can effectively shield $30 million. Most families will never exceed this threshold. Those with larger estates need to plan the allocation carefully because the exemption isn’t automatic. The executor has to affirmatively allocate it on the estate tax return.
One important exception: if a grandchild’s parent (your child) died before the transfer, the grandchild moves up a generation for tax purposes and is no longer treated as a “skip person.”5Congress.gov. The Generation-Skipping Transfer Tax The GST tax doesn’t apply at all. This matters most in families where a grandparent steps into a parental role after losing a child.
Giving During Your Lifetime Instead of (or Alongside) a Will
You don’t have to wait until death to benefit grandchildren. Lifetime giving reduces your taxable estate, lets you see the impact while you’re alive, and in some cases provides significant tax advantages.
529 Education Savings Plans
A 529 plan lets you contribute money that grows tax-free and comes out tax-free when used for qualified education expenses, including tuition, room and board, books, and up to $10,000 per year of K-12 tuition. You can open a 529 naming a grandchild as beneficiary while keeping control over the funds, including the ability to change the beneficiary to another family member if plans change.
The real estate-planning power of a 529 is “superfunding.” Federal law lets you contribute up to five years’ worth of the annual gift tax exclusion in one year and spread the gift evenly over five years for tax purposes. With the 2026 annual exclusion at $19,000, one grandparent can contribute up to $95,000 at once per grandchild, and a married couple can contribute up to $190,000, without triggering gift tax.6Internal Revenue Service. Frequently Asked Questions on Gift Taxes You file a gift tax return (Form 709) in the first year to report the election, and additional gifts to the same grandchild during the five-year window reduce the available exclusion.
Under the SECURE 2.0 Act, unused 529 funds can be rolled into a Roth IRA in the beneficiary’s name, subject to a $35,000 lifetime cap and other conditions, which gives grandchildren a start on retirement savings if they don’t use all the education money.
Annual Exclusion Gifts
Outside of 529s, you can give each grandchild up to $19,000 per year (2026) with no gift tax implications.6Internal Revenue Service. Frequently Asked Questions on Gift Taxes A married couple can give $38,000 per grandchild per year by gift-splitting. For families below the estate tax exemption, annual giving is more about generosity than tax strategy. For larger estates, consistent annual gifts over a decade or more can move meaningful wealth without touching your lifetime exemption.
If Your Grandchildren Are Still Minors
Minors can’t legally own or manage significant assets. Without a plan, a court may appoint a property guardian to manage the inheritance under ongoing supervision, with costs that eat into the funds meant for your grandchild.
Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) custodial accounts let you transfer assets to a minor through a custodian who manages the funds until the child reaches a specified age.7Legal Information Institute. Uniform Gifts to Minors Act UGMA accounts hold cash and securities, while UTMA accounts can also hold real estate and other property.8Social Security Administration. POMS SI 01120.205 – Uniform Transfers to Minors Act
The catch is that the child gains full, unrestricted control at the termination age set by state law. Many states set it at 21, some at 18, and several allow you to specify a higher age at account creation. Once that age arrives, the money is theirs with no conditions. A trust lets you set distribution ages well beyond that, restrict spending to specific purposes, and protect assets from a young adult’s creditors or poor decisions. You can stage payouts (a third at 25, a third at 30, the rest at 35) or tie distributions to milestones. Custodial accounts are simpler and appropriate for smaller amounts. For a substantial inheritance, a trust usually earns its added complexity many times over.
What Should Actually Drive Your Decision
The mechanics matter, but the right structure depends on circumstances no template can predict.
Age and maturity. An adult grandchild with a stable career can handle a direct bequest. A teenager or young adult who has never managed money needs guardrails. A trust with staged distributions is the standard answer, but you know your grandchildren better than any default rule does.
The parents’ financial situation. If a grandchild’s parents are dealing with creditors, bankruptcy, or a volatile marriage, an inheritance that passes through the parents’ hands or could be treated as a marital asset in a divorce may never reach the grandchild. A properly drafted trust keeps those assets separate. Planning around this is uncomfortable, and it’s also one of the most common reasons estate planners recommend trusts.
Specific goals. If you want funds used only for education, a 529 or an education-restricted trust accomplishes that more reliably than hoping your grandchild shares your priorities. If a grandchild has a disability, a special needs trust isn’t optional; it’s the only way to leave an inheritance without jeopardizing their benefits.
Family dynamics. Equal isn’t always equitable. One grandchild may have wealthy parents while another’s family struggles. One may have lifelong care needs. Whatever you decide, telling your children your reasoning during your lifetime prevents the will from becoming the first time anyone hears the plan. Surprises in probate breed resentment and litigation.
Drafting Choices That Protect the Plan
Survivorship Clauses
A survivorship clause requires a beneficiary to outlive you by a specified period, commonly 30 to 60 days, before their inheritance vests. Without one, if a grandchild dies shortly after you, the assets pass through their estate rather than going where you’d have wanted. Many states impose a default five-day survivorship period when a will is silent, but that’s too short to be useful in most situations.
No-Contest Clauses
A no-contest clause (sometimes called an in terrorem clause) provides that any beneficiary who challenges the will forfeits their inheritance. Most states enforce them, though many allow an exception when the challenger had probable cause and acted in good faith. A few states refuse to enforce them at all.9Legal Information Institute. No-Contest Clause The clause only deters a challenge when the challenger has something to lose, so it works best when the potential challenger receives a meaningful bequest they’d forfeit by contesting.
Grandchildren Born After You Sign the Will
Pretermitted heir statutes exist in most states to protect children and spouses who were unintentionally left out of a will, typically because they were born or adopted after the will was signed.10Legal Information Institute. Pretermitted Heir These statutes generally apply to your children, not your grandchildren. A grandchild born after you sign your will has no automatic legal claim to a share of your estate in most states. If you want after-born grandchildren included, either update your will when they arrive or use class gift language (“to all my grandchildren living at the time of my death”) that automatically captures future grandchildren without requiring a revision.
The interaction between your will, any trusts, beneficiary designations on retirement accounts and insurance policies, and the applicable tax rules is complex enough that a drafting error can cost your family more than an attorney’s fee by a wide margin. Review the plan when a grandchild is born, when a family situation changes, or when tax laws shift.