You’ve worked hard to accumulate your wealth and now want to share the fruits of your labor with your grandchildren. But what are some thoughtful ways to do so? Here are six ideas for financial gifts with long-term benefits for your grandchildren.
Contribute to charity. Giving to charity on behalf of a loved one can be a powerful way to give back while sharing your values with a future generation. Spread the holiday spirit by planning a day to volunteer together or donate money to a charity that is important to your grandchild.
Provide college funds. Tuition is rising rapidly, outpacing inflation. If your grandchild is college-bound, consider gifting money to help offset the cost. You may pay tuition to the school directly (which can avoid gift tax implications) to assist a grandchild already enrolled or open a college savings plan for younger children. A common option is a 529 plan, which allows the funds to be withdrawn tax-free to pay for eligible college expenses down the road. You may open different accounts for each grandchild or, in certain circumstances, reassign the beneficiary of one account as needed. Communicate your intentions with your children (and grandchildren, as appropriate) so they know how much to expect from you.
Pay dental and medical expenses. If your grandchild experienced a health setback, helping pay their bills could give them a fresh start in 2019. Current tax laws allow individuals to pay medical and dental bills for another person without incurring a gift tax — and without using your annual gift exclusion of $15,000 per individual recipient. This gift tax exception applies if the bills are paid directly to the medical facility; they cannot be paid as reimbursement to the grandchild.
Give stock. Giving stock is a great way to introduce grandchildren to the world of investing. In 2018, you and your spouse may each use the annual gift tax exclusion of up to $15,000 per individual recipient to give grandchildren gifts, such as stock. If you’d like to give stock you already own, the shares need to be re-titled in the grandchild’s name (you may have to pay a small fee for re-titling). Or, you may purchase stock titled in your grandchild’s name. If you are gifting stock to a minor, you can retain some control by placing it in a trust.
Create a trust. Speaking of trusts, if leaving an inheritance is part of your legacy plan, consider if establishing one can help you realize this goal. Trusts provide you with control over when and how money is distributed to one or more beneficiaries, while potentially minimizing the impact of federal and state estate taxes. For example, an attorney can help you specify the age when beneficiaries inherit money, the rate funds are distributed at and when dividends are paid (e.g. on the grandchild’s birthday or a holiday).
Give advice. This holiday season, you could help your grandchild establish a strong financial foundation. Consider paying for a consultation or yearly fee with an estate planner, career coach, financial advisor or another professional who can help your grandchild reach one of their key goals.
As you consider how to share your wealth, ensure your giving strategy is aligned with your financial plan. A financial advisor working with your tax professional can help you evaluate tax-efficient financial strategies to help maximize your gift this year – and into the future.
Carlos F. Arias, CRPC ® , CLTC
Private Wealth Advisor
Arias & Partners Wealth Advisors
A private wealth advisory practice of Ameriprise Financial Services, Inc.
An Ameriprise Private Wealth Advisory Practice
Carlos F. Arias, APMA, CRPC ®, CLTC, is a Private Wealth Advisor and Business Financial Advisor with Arias and Partners Wealth Advisors, a private wealth advisory practice of Ameriprise Financial Services, Inc. in Cranford, NJ.
He specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years.
To contact him,
123 N. Union Avenue
Cleveland Plaza - Suite 306A
Cranford, NJ 07016
Investment advisory products and services are made available through
Ameriprise Financial Services, Inc., a registered investment adviser.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
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