As grandparents, you likely love the opportunity to shower your grandchildren with gifts.
In most cases, these gifts are given on holidays and birthdays and commonly consist of
an item that may have been at the top of your grandchild’s wish list. While experiencing
the joy on your grandchild’s face when they open a new doll or new race car is
immeasurable, it is not uncommon to want to leave more substantial and meaningful
gifts to your grandchildren. For example, you may want to provide them with a gift that
can assist them in building a savings account, furthering their education, or purchasing
their first home. Here are a few things to think about when considering making these
types of gifts.
1. When do you want to make a gift?
The first crucial decision is when to give them this gift. Various factors may influence
your choice of timing. If your grandchildren are slightly older and are exploring college
options, you might consider gifting them funds to assist with their education. Similarly, if
you have adult grandchildren preparing to buy a home, planning a wedding, or
expecting their first child, you may wish to offer them a monetary gift sooner rather than
later. Making a gift during your lifetime allows you to witness the impact it will have on
the recipients, which can be incredibly rewarding and meaningful.
However, there are instances where a gift given after your passing can carry equal
significance. If you have younger grandchildren, planning for their postsecondary
education, purchasing their first home, or starting their own business may be in the
distant future. In cases such as these, you may feel more comfortable leaving money to
your grandchild at your death since their need is not immediate. Your gift, although
delayed, can still help support their future, it can provide them with much-needed
financial assistance, and ultimately, it will leave them with a lasting memory of your love
2. Can you afford to leave a gift to them?
Consider meeting with a financial advisor to help you develop long-term plans that align
with your financial goals and take into consideration the ever-changing costs of living. A
responsible advisor will analyze your current financial situation, along with your goals
for the future, and help you determine the best methods to prepare for your financial
future. This may involve your advisor recommending that you not take certain risks or
make any considerable gifts.
If it is your desire to leave a gift to your grandchildren, you will need to assess if it fits
within your current financial capabilities. Planning for your future requires careful
consideration of the potential costs for care, especially if more substantial or
institutionalized medical or long-term care becomes necessary. The Administration on
Aging estimates that at least 70 percent of people who are 65 today will require care in
some context. Notably, the national median annual costs for nursing home care in 2023
have risen to approximately $108,405 for a private room, compared to $92,376 in 2016.
The average length of stay in long-term care is 3.2 years. Just over 20 percent of
residents will require care for 5 years or longer. For those who are currently married, it
becomes essential to not only thoughtfully weigh your own current and future needs, but
also those of your spouse. With the rising costs of care, you must consider whether your
surviving spouse will need to rely on your remaining funds for their livelihood.
So a significant to your grandchildren may not always be practical or feasible given
your current and future financial situation. If you wish to create a plan that includes a
gift for your grandchildren, consulting with an experienced estate planning attorney is
recommended. Together, you can devise a well-crafted plan that ensures that the gift is
made when both of you are no longer living, if funds are available. This way, you can
better align your intentions with your financial circumstances, which ultimately
safeguards your family’s future
3. What impact will the gift have?
Lastly, you should consider both the potential positive and negative aspects of gifting to
your grandchildren. Gifting can allow your grandchildren to have new experiences, build
a nest egg, and invest in their future. Ultimately, these gifts can result in a profound and
lasting impact on your grandchildren’s future.
On the other hand, depending on how the gift is structured, it could impact your
grandchild’s ability to receive assistance with education by impacting the amount of
assets required to be listed on their Free Application for Federal Student Aid (FAFSA).
In some cases, providing a large sum of money to a child or young adult can have the
negative consequence of disincentivizing them to obtain or maintain employment or
continue or complete their education. Large gifts can provide a false sense of
financial security and result in excessive or irresponsible spending habits.
You should carefully consider the potential unintended consequences of gifting. Luckily,
most negative effects can be mitigated by working with an experienced estate planning
attorney who can create a strategic plan to leave an inheritance while avoiding potential
pitfalls of gifting.
If you would like to gift money or property to your grandchildren in a way that is
protected and has a lasting impact, give us a call so we can help you plan the perfect