When planning to allocate wealth to future generations, one of the main concerns that arises is the prospect of tax consequences not only for the benefactor, but the recipients of the inheritance. While the various methods of spreading inheritable assets – such as through gifting, custodial accounts, trusts, savings bonds and educational or medical donations – should necessitate serious consideration, planning involves much more than simply deciding on the vehicle of distribution. Of particular concern, gifting beyond a single generation becomes complicated.

Due to the generation skip between grandparents and grandchildren, inheritances are treated differently for these situations. Whether the inherited property is directly bequeathed to the grandchild or the grandchild is a recipient of the property following a parent's death, property that is passed down from a grandparent to a grandchild can come with additional tax burdens. One of the more common examples of these tax burdens is the Generation-Skipping Transfer (GST) tax, which is in place to ensure that transfer of wealth to second-generation recipients is not completed to evade taxes.

Just as there is no one-size-fits-all retirement plan, certain inheritance vehicles may be more appropriate than others, depending on the specific situation. In other words, do not assume that gifting the maximum amount each year to individual recipients during the benefactor's lifetime is the best way to spread familial wealth; do not assume that a single estate with numerous beneficiaries is the best, or that custodial trusts for each descendant beats all other options across the board.