3 ways grandparents can help grandkids avoid financial struggles
As we age, our priorities change. Although at one time we were concerned about preparing for retirement and ensuring that our children were raised properly, for many the time comes when their focus shifts to ensuring that their grandchildren have the love and support that they need as they grow up. There are a number of ways that you can ensure that your grandchildren have what they need as they grow up, including finding ways to spend time with them and raising your own children to be good parents. But there are also estate planning tactics that you can utilize to ensure that your grandchildren avoid the financial struggles that far too many people end up facing. This week on the blog, let’s look at three of them.
- Giving financial gifts while you’re still around: This is a very direct way of providing financial support to your grandchildren. And in most instances, you don’t have to worry about taxes on money that you gift. In fact, federal law allows you to gift more than $11 million over the course of your life without the gift tax kicking in. Keep in mind though that the gift and estate plan tax exemption is cumulative, meaning the more you give during your life the less you can exempt from your estate when the time comes. There are some limitations on lifetime gifting, though. For example, you can typically only gift each individual up to $15,000 a year without any taxes kicking in. This is known as the gift tax exclusion.
- Setting up a college savings plan: Often referred to as a 529 plan, a college savings plan allows you to put money away for a loved one’s college expenses while avoiding immediate taxation. Under federal law, funds that are placed into the account are not taxed despite earning profits on investments. When the money is withdrawn and used for education-related expenses, the funds remain untaxed at the federal level. These plans are pretty flexible, too, allowing your grandchild to use it to pay for not just tuition, but also student loan payments, books, board, technology-related equipment, and apprenticeship programs.
- Building a strong estate plan: While these specific steps can go a long way toward ensuring that your grandchildren have the financial security that they need and deserve, your options for protecting them from financial struggles doesn’t stop there. In fact, building a sound estate plan can be a great way to protect your grandchild. Sure, you can leave assets directly to your grandchild that will likely be exempt from taxation, but you can also place assets into a trust that sets some parameters around distribution of trust funds. This can help you ensure that the assets aren’t squandered so that your grandchild is set up for lifelong financial success. Remember, too, that estate planning is an entirely customizable process with a lot of options, so you have the ability to build the estate planning strategy that suits your needs and the needs of your grandchildren.
Be comprehensive in protecting your grandchildren from financial struggles
Modern society has a number of pitfalls to which anyone can fall victim. Sadly, those who find themselves facing financial struggles often fight for years or even decades to bring themselves back to a stable situation. Fortunately, you can help your grandchildren avoid these situations by building a holistic and thorough plan that addresses their needs. If you’d like to learn more about the steps you need to follow to do so, then now may be the time to sit down with an experienced attorney to discuss the process.