Giving money to grandchildren is a fairly easy thing to do. Many grandchildren are as involved in the lives of their grandparents as children, especially since more and more grandparents are raising grandchildren. Grandparents wanting to provide for grandchildren can do so by having the proper documents as part of their final plans, or by setting up special accounts.
Things You'll Need
- An estate planning attorney
- A certified financial planner
Visit an attorney specializing in estate planning or a certified financial planner. These individuals can guide you through the gifting process.
Set up a custodial account for your grandchild. This type of account prevents a minor child from misusing money set aside for them until they are of legal age.
Give money intended for medical expenses for a grandchild directly to the doctor or hospital. These types of gifts, if paid to the provider directly are not seen as taxable.
Set up a retirement account for a grandchild. This is a great way to begin to teach them the importance of saving for the future. It also forces them to use the money you give for a specific purpose. This can also help reduce your own estate value, helping with taxes later on.
Establish a minor's trust. This can be funded through your will and set up to allow payments over time to be awarded at certain ages.
Start an educational savings plan. These range from state sponsored prepaid tuition, 529 plans or educational IRA's. Each of these plans has tax benefits for you.
Pay college tuition directly. By making the payments out directly to the educational institution, you avoid certain gift taxes.
Tips & Warnings
- All of the gifting programs for grandchildren have certain tax advantaged for you or your family after you die. A good estate planning attorney is invaluable when setting up any kind of trust or savings plan for your grandchildren.
- Give large amounts of money to grandchildren only if you're sure it's being done in a legal, tax effective way.