Tip of the Week

Grandparents, Gifts, and Estate Planning

We all deal with parents deciding how they will provide for their children in conjunction with their estate planning. What about grandparents? While the subject is not an everyday staple as it is for parents, it is nonetheless a recurring topic.

Some grandparents focus in a serious way on the essential items for grandchildren that are the responsibility of the parents, rather than the grandparents, to provide, such as college funding. Grandparents might also make cash gifts for such activities as tennis lessons, summer camp, horseback riding, etc. In the larger scheme of things, these are not as essential as academic education, but maybe that’s the point. Let the parents pay for those items that they are primarily responsible for, while the grandparents might furnish funds for those luxury items or fun activities and experiences that are not easily affordable for the parents. While most people would agree that higher education funding is an essential goal, grandparents, within their own value systems, might regard sports lessons or private school tuition for younger children as their preference.

There are various planning techniques that grandparents might consider when planning for grandchildren. These include cash gifts, 529 contributions, Uniform Transfer to Minors accounts (UTMA), Uniform Gift to Minors accounts (UGMA), IRC Section 2503(c) trusts, and other alternatives.

Estate planners can review with clients the multiple planning options to ensure their grandchildren are properly protected for years to come.

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