Nothing like the generosity of grandparents. As kids, we adore our grandparents and as adults, we watch our parents become the grandparents as they influence our children; all the while, making sure the world knows that whatever the little darlings want, they’ll ensure they have it. And at some point, we begin to envy them and begin to look forward to the kind of happiness we hope to know when we’re older. It’s little wonder, then, that grandchildren are at the root of every decision made in one’s will. Estate planning and grandchildren go hand in hand.
Estate Planning and Grandchildren
Grandparents see their family’s legacy in those small faces that look up at them; it’s proof that a new generation is well on its way and for many, they want to be sure that next generation receives every benefit.
Often, those ample resources mean college tuition, summer camp fees, new cars, weddings and no shortage of weekend trips and full-fledged vacations. It’s not at all uncommon for grandparents to want to provide even more extravagant gifts if they have the resources. It could be the down payment on a home or some other expensive gift. Before you do that, though, there are a few considerations that will surely affect your decision.
No Favoritism Here
Keep in mind that all eyes are on Grandpa and how he handles the expensive gift with the rest of his grandchildren. In one instance, a client explained that he and his wife had two daughters. Each daughter grew up and had one child each. The oldest daughter divorced her husband and he quickly showed his true colors by not being in her son’s life. The other daughter has her own daughter.
In this instance, the little girl has grandparents on both sides of her family whereas her young cousin has only one set of grandparents – the client and his wife. Fortunately, they’re a close family and no one is bothered by the fact that a bit more attention has been paid to the grandson, especially considering how much they love both grandchildren and how obvious it is to anyone. That’s not always the case, though. Some families aren’t that close to where it won’t affect their family dynamics. Just be sure you understand you might have to defend your decisions for giving one grandchild an early inheritance or the fact that one grandchild may receive slightly more.
Ah, those pesky taxes. The good news is that the new federal laws mean you don’t have to worry about taxes unless your gifts cross that $5.25 million threshold. But there are annual limitations that you should keep in mind. Any gift to an individual in excess of $14,000 annually means a report on their tax returns. Now, each grandparent can give $14,000 each to the same person and bypass that notation on the tax return, but the minute you cross that threshold, it’s another story. That said, you’re not required to report payments made directly to medical and educational institutions for costs associated with health care, tuition or other similar disbursements.
These are just a few of the many considerations. It’s always a good idea to consult your estate planning lawyer to ensure you’re not creating future problems for yourself or the grandchildren you adore. To learn more, contact us today.
To learn more, please download our free legacy planning report here.
- What You Need to Know to Protect Your Special Needs Child - May 30, 2023
- How Tax and Non-Tax Considerations Impact Estate Planning – Part I - May 25, 2023
- The IRS’ Annual Warning: The 2023 Dirty Dozen - May 23, 2023