When the Cousins Inherit: Planning for the Third Generation
A lot of estate plans focus on transferring assets directly to the next generation. It makes sense. An incredibly common scenario is parents leaving everything to their children. “What happens if your children predecease you?” is not a question I particularly enjoy asking, nor is it one clients are particularly eager to think about. But. What if?
Which leads me to bring up what most estate plans never address directly: the point at which it passes not to children, but to grandchildren. Siblings who grew up in the same house give way to cousins who may live in different states, hold different values, and barely know one another. One branch of a family may grow its share substantially while another struggles to cover basic expenses, and a family property can end up used almost entirely by one branch while the others rarely visit but still share the cost.
None of this is unusual. It is the predictable result of plans built around the first transfer and not the second. For families in Fairfield County with significant real estate, investment portfolios, or a closely held business, the cousin generation is where careful drafting matters most.
Why the third generation is different
The math of a family tree is unforgiving. Suppose you leave your estate equally to three children. One has a single child, one has two, and one has three. If each child's share eventually passes to his or her own children, one grandchild receives a third of the family's wealth, two receive a sixth each, and three receive a ninth each. Every step was "equal," but the cousins end up in very different positions.
At the same time, the relationships that held the family together tend to weaken. Siblings share a history and usually find a way to resolve disagreements. Cousins often lack that foundation, and they bring spouses, in-laws, and their own financial pressures into decisions about assets they did not choose to own together.
Choose the distribution pattern deliberately
Most wills and trusts default to a per stirpes distribution, meaning each child's branch takes an equal share regardless of how many people are in it. That is a reasonable default, but it is not the only option. Some clients prefer to treat each grandchild equally at a certain point (a per capita approach), particularly when assets skip a generation or when a child predeceases. Others want to equalize for lifetime gifts already made to one branch, such as help with a home purchase or tuition.
There is no single correct answer. The point is to make the choice consciously, with an understanding of how the numbers will actually play out for your family.
Plan for the shared property
The family vacation home is the asset most likely to cause friction at the cousin level. A house that worked well when parents paid the bills and set the schedule can become a source of resentment once ownership is spread across several households.
If you want a property to stay in the family, it should not simply pass outright in fractional shares. Better approaches include:
Holding the property in an LLC or trust with clear rules on use, scheduling, and decision-making.
Funding a maintenance reserve so that taxes, insurance, and repairs do not depend on each owner's ability or willingness to contribute.
Including buyout provisions that let an owner exit at a defined valuation without forcing a sale.
Restricting transfers so that shares cannot pass to spouses or outside parties without the family's consent.
In some families, the better answer is to sell the property at a defined point, or to leave it to the branch that uses it and equalize the others with different assets. Those conversations are easier to have now than after the fact.
Use continuing trusts, not outright distributions
When an inheritance passes outright, it becomes exposed to the beneficiary's creditors, a future divorce, and the beneficiary's own judgment at whatever age the distribution happens. A continuing trust for each child's share, which can later continue for that child's descendants, provides protection that an outright gift cannot.
Connecticut law is well suited to this kind of planning. For trusts created on or after January 1, 2020, Connecticut permits a trust to last up to 800 years, which allows a family to build a long-term "dynasty" structure without moving the trust to another state. Connecticut also allows the roles of trustee to be divided, so that, for example, a family member can direct investments while a professional handles administration.
Tax planning reinforces the point. In 2026, the federal gift, estate, and generation-skipping transfer (GST) tax exemptions are each $15 million per person, and the Connecticut estate and gift tax exemption is also $15 million. Properly allocating GST exemption to a long-term trust can keep assets outside the transfer tax system for generations. Connecticut does not allow a surviving spouse to use the deceased spouse's unused exemption, so married couples need to plan for both exemptions affirmatively.
Select fiduciaries with the long view in mind
The person who makes sense as trustee for your children may not be the right choice once the beneficiaries are cousins. A trustee who belongs to one branch of the family can face real or perceived conflicts when making decisions that affect the others. Consider naming an independent or professional co-trustee, building in a trust protector with authority to adjust administrative terms, and providing a clear process for replacing trustees over time.
Leave guidance, not just documents
Trust language sets the rules, but it cannot capture everything you want the next generations to understand. A letter of wishes can explain your intent for a family property, your views on distributions for education or a first home, and the values you hope the wealth will support. Families who hold periodic meetings, even informally, tend to handle the transition to the cousin generation with far less conflict.
Review the plan as the family grows
A plan drafted when your children were young may not account for grandchildren, blended families, adoption, or children born through assisted reproduction. Definitions of "children" and "descendants" should be precise, and the plan should be reviewed as each new generation arrives.
Planning for what comes next
Most families focus on the first transfer. The families that preserve both their wealth and their relationships are the ones that also plan for the second. If you would like to talk through how your current plan will work for your grandchildren, you can schedule a Planning Session at calendly.com/elizabeth-elizabethroachelaw/plan.
This post is for general information only and is not legal advice. Reading it does not create an attorney-client relationship.
