Protecting Your Family's Wealth with GSTs

A generation-skipping trust (GST) transfers wealth to a future generation, usually grandchildren, and bypasses the immediate heirs. GSTs have become popular as a way to protect a family's wealth from divorce, tax levies, creditors, and untrustworthy children. Experts suggest that creators of such trusts be careful and avoid confusion and hurt feelings by communicating to their children not only the details of the trust but also the intentions behind the trust.

The more heirs understand why they may have been skipped, the less they will feel overlooked or abandoned. Grantors may need to ensure that all grandchildren, and therefore the grantor's children, are treated equally and fairly. If one grantor's child has less offspring than their sibling, they may feel they were deprived if their single child received the same amount as each of their sibling's children. Grantors also should protect their beneficiaries' future wealth and wishes. Trustees should be chosen wisely, investments should ensure growth, and clauses that determine future flexibility for the beneficiary should be considered.