Money changes people. But death? Death changes families. Most people spend their entire lives building a nest egg, buying a home, or investing in a 401(k) with a singular, driving thought: it’s for the kids. We want to leave a legacy for and their children after them. It’s a biblical phrase, a legal concept, and a deeply emotional promise all rolled into one. Yet, it’s also where things usually fall apart.
You’ve probably heard the horror stories. A cousin gets sidelined. A family home is sold at a loss because nobody could agree on the paint color, let alone the mortgage. Most people think a simple will solves everything. It doesn’t. In reality, the legal mechanics of how wealth moves from one generation to the next—especially when you’re talking about "issue" (the legal term for lineal descendants)—is a labyrinth of state laws, tax codes, and messy human emotions.
Why "Per Stirpes" Is the Phrase You Actually Need to Know
If you want to ensure your assets reach your kids and their children after them, you have to understand a little Latin. I know, it sounds boring. It's not. Per stirpes basically means "by the branch." Imagine your family tree. If you leave your estate to your three children per stirpes, and one of those children passes away before you do, that child’s share goes directly to their children.
It keeps the money in the "branch."
The alternative is often per capita, which means "by the head." This can get messy fast. If you have three kids and one dies, leaving two grandkids behind, a per capita distribution might split your money equally among the two surviving children and the two grandkids. Suddenly, one branch of the family is getting way more than the others. It’s a recipe for a Thanksgiving fistfight. Most estate attorneys, like those at the American College of Trust and Estate Counsel (ACTEC), argue that per stirpes is the default for a reason—it mirrors what most parents actually want, which is fairness between lineages.
The Generation-Skipping Transfer Tax (GSTT) Trap
Let’s talk about the IRS because they are definitely interested in your kids and their children after them. There is a specific tax called the Generation-Skipping Transfer Tax. It’s a monster.
Back in the day, wealthy families figured out a loophole. They would leave money directly to their grandkids, skipping their own children. Why? To avoid paying estate taxes twice. The government caught on. Now, if you transfer assets to a "skip person" (someone more than 37.5 years younger than you), you might trigger a flat tax that sits right on top of the regular estate tax.
As of 2024, the exemption is high—over $13 million—but that sunset provision is coming in 2026. If Congress doesn't act, that threshold is going to drop significantly. You’re looking at a potential 40% hit on wealth intended for future generations. It’s not just a "rich person problem." If you own a house in a high-value area like California or New York and have a decent life insurance policy, you might be closer to that line than you think.
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Dynasty Trusts: Keeping the Money in the Family Forever
Some people don't just want to provide for their kids; they want to provide for their great-great-great-grandkids. This is where the Dynasty Trust comes in. In states like South Dakota, Nevada, and Delaware, they’ve basically abolished the "Rule Against Perpetuities."
That rule used to mean a trust had to end eventually—usually about 21 years after the death of the last person alive when the trust was created. Not anymore. Now, a trust can technically last for 1,000 years.
Imagine a pot of money that grows, protected from creditors, protected from ex-spouses, and protected from the estate tax, serving your descendants for centuries. It sounds like a dream, right? But there’s a catch. You’re essentially ruling from the grave. You’re deciding how people you’ll never meet will spend their money. It can create "trust fund babies" who have no incentive to work. Wealthy families like the Rockefellers have used these structures for decades, but they often pair them with "Letter of Wishes" documents that outline family values, not just dollar signs.
The Reality of Intestate Succession
What happens if you do nothing? If you just assume the state will take care of your kids and their children after them?
You’re in for a shock.
If you die "intestate" (without a will), state law decides who gets what. Most people assume it all goes to the spouse. Often, it doesn't. In many states, if you have children, the spouse gets a share and the children get a share. This sounds okay until you realize that if the children are minors, the court has to appoint a guardian to manage their money. Every time that guardian wants to spend money on the kid’s tuition or braces, they might have to ask a judge. It’s expensive. It’s slow. And it’s entirely public.
Blended Families and the "Accidental Disinheritance"
This is where things get truly heartbreaking. We live in an era of second marriages and step-children.
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Let’s say you marry someone who has kids from a previous relationship. You have kids together. You leave everything to your spouse, assuming they will take care of and their children after them. But then you die. Your spouse remarries. They leave everything to their new partner or their own biological children.
Your biological children are left with nothing.
This isn't just a plot for a movie; it happens every single day in probate courts. To prevent this, experts often suggest a QTIP Trust (Qualified Terminable Interest Property). It allows you to provide for your spouse for the rest of their life, but you—not them—decide where the remaining money goes after they pass away. It ensures your assets actually reach your biological or intended heirs.
Real Assets vs. Paper Assets
We often talk about "wealth" as a number in a bank account. But for many, the legacy is a physical place. A family farm. A cabin by the lake.
These are the hardest assets to pass down to children and their children after them. Why? Because you can’t easily split a cabin three ways. One kid wants to keep it. One wants to sell it. The third can’t afford the taxes.
If you want to keep a physical legacy intact, you need a business structure. Many families are now putting real estate into an LLC (Limited Liability Company). The kids don't own the "house"; they own "shares" in the company that owns the house. This allows you to set up operating agreements. You can dictate how maintenance is paid, who gets which weeks in the summer, and what happens if someone wants to be bought out. It turns an emotional powder keg into a business transaction.
The Psychological Burden of the "Gift"
There is a flip side to all this legal maneuvering. Receiving a massive inheritance can be a curse.
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Studies in the Journal of Financial Planning often point to the "Shirt Sleeves to Shirt Sleeves in Three Generations" phenomenon. The first generation builds it. The second manages it. The third spends it.
To break this cycle, you have to talk to your kids. Honestly. Most parents are terrified of telling their children how much money they have because they don't want them to "become lazy." The irony is that by keeping them in the dark, you’re ensuring they won’t know how to handle the money when it hits their lap. Financial literacy is the only real way to protect your children after you.
Taking the First Real Steps
If you actually care about what happens to your assets and your descendants, stop Googling and start acting. It’s easy to feel overwhelmed, but the path is actually pretty linear.
First, get a Transfer on Death (TOD) or Payable on Death (POD) designation on every single bank account and brokerage account you own. This bypasses probate entirely. It’s free. It takes five minutes.
Second, check your beneficiary designations on your life insurance and 401(k). These forms override whatever is in your will. If your ex-wife is still on your 401(k) from 20 years ago, she’s getting that money, even if your will says it goes to your kids. The law doesn't care about your "intent" if the paperwork says otherwise.
Third, consider a Revocable Living Trust. This is the gold standard for anyone who wants to keep their family out of court. It keeps your business private, allows for a smooth transition if you become incapacitated (not just when you die), and gives you pinpoint control over how and when your children receive their inheritance. You can stipulate that they get 25% at age 25, 25% at 30, and the rest at 35. It protects them from their own youth.
Finally, write a "Legacy Letter." It’s not a legal document. It’s a letter that explains why you made the choices you did. It explains the stories behind the heirlooms. When the lawyers are done and the accounts are settled, this is usually the thing the children and their children after them actually value the most.
The legal system is built on cold logic and rigid rules. Your family is built on relationships. Navigating the intersection of the two is the hardest, and most important, job you'll ever have. Start the process now, while you can still speak for yourself, rather than leaving the courts to guess what you wanted.
Review your current estate plan against the "Per Stirpes" standard to ensure no branch of your family is accidentally cut off. Contact a local estate attorney to discuss whether a Dynasty Trust or a simple Living Trust fits your current net worth and long-term goals. Update your digital asset inventory—passwords, crypto keys, and photo storage—so your legacy isn't locked behind a screen forever.