7 Things to Think About Before Giving Gifts to Grandchildren
Entrusted Legacy Law
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Jun 26, 2023
Pennsylvania - Greater Pittsburgh Area
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If you have grandchildren — or are getting ready to welcome
one — you know the special joy they bring. After all, you can now leave all the
heavy lifting to the parents and just enjoy connecting with them.
Many grandparents who enjoy financial freedom are often more than generous to grandchildren. And some even wish to see their grandchildren enjoy an inheritance now instead of waiting to pass along assets after they are gone. If that’s you, here are seven things you should think about before you make gifts to grandchildren.
Clarify The Gift
Most grandparents gift outright, no strings attached. But if
you think you are providing a loan or an advance on an inheritance, you need to
clarify that in writing.
Equal Treatment
It is not unusual for a grandparent to be closer to some
grandchildren than others, but when you are gifting assets, unequal treatment
among grandchildren could lead to family resentments. Even if you give more to
some than others during your life, consider treating all grandchildren equally
in your estate plan.
Taxes
With the federal gift tax threshold at $12.92 million
(double that for married couples), most people won’t have to worry about paying
federal gift taxes. However, any gift to an individual that exceeds $17,000
each year ($34,000 for married couples) must be reported on a gift tax return.
Education
You can help with a grandchild’s college tuition by making
payments directly to their educational institutions, which don’t have to be
reported. And there is no limit on these contributions. Investing in a 529 plan
for each of your grandchildren is also a great way to help them (and their
parents!) save for college, building a tax-deferred account that will never be
taxed as long as it is used for educational purposes.
Your Own Needs
It’s tempting to be too generous in making gifts to
grandchildren, but you should not give to the detriment of your own needs.
Finding the right balance will help ensure your children and grandchildren
don’t have to support you because you gave too much to them.
Long-Term Care
Chances are that you will need some kind of long-term care
at the end of your life, research shows that most of us will. If you can’t
afford long-term care and need help, any gift of assets you have given could
make you ineligible for Medicaid benefits for five years.
Consider A Trust
There are many reasons why you should not give gifts of cash
or assets to grandchildren, some that you may not even be aware of. Lots of
cash could be fuel on the fire of bad behavior or undermine your own children’s
goals for their children. To make a lasting gift, consider using a trust that
will pass assets along to grandchildren safely and protect those assets from
bad behavior, bad marriages and bad credit.
If you have questions, contact Sharek Law Office at 412-547-9855 or click here to schedule a complimentary 15-Minute Call with our staff to learn how we can help
This article is a service of Sharek Law Office, LLC.
We don’t just draft documents; we ensure you make informed and empowered
decisions about life and death, for yourself and the people you love. That’s
why we offer a Life and Legacy Planning Session, during which you will get more
financially organized than you’ve ever been before, and make all the best
choices for the people you love. You can begin by calling our office today
to schedule a Life and Legacy Planning Session and mention this article
to find out how to get this $750 session at no charge. Please note this
is educational content only and is not intended to act as legal advice.
- To view the original version of this article visit www.shareklaw.com/post/7-things-to-think-about-before-giving-gifts-to-grandchildren
- Seniors Blue Book was not involved in the creation of this content.
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