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New grandchild financial gift
Old 11-07-2018, 11:32 PM   #1
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New grandchild financial gift

Hi,

First grandchild is on the way! We want to give a financial gift that could be used for college or future life needs. Since the gift will not be used for at least 18 years, we would also like some flexibility to give it later, and/or to give it to his parents in order to support their child, especially if life circumstances dictate it.

If you have thoughts, suggestions, experience, about how to do this (or even if to set up the a gift with this approah) please share. If you need more info, I can provide that as well.

Thanks
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Old 11-08-2018, 04:14 AM   #2
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You could open a Uniform Transfers to Minors Act account to do that.
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Old 11-08-2018, 05:17 AM   #3
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Congrats! We received our first grandbaby last year.

There will be no shortage of things to spend money on, we choose to help the new family with memberships to the aquarium, etc, stuff they like to do, baby now 16 mo old.

My recommendation would be to not do one big lump sum up front as (you seem to perceive) things come up along the way that can change how you feel about things...like more grandkids. You will be setting a standard you will be measured by later.

It’s so much fun and Facebook and other programs make it easier to be a ‘million’ miles away if that’s your situation.
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Old 11-08-2018, 06:25 AM   #4
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529 plan?
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Old 11-08-2018, 07:17 AM   #5
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529 plan?
Sounds like the OP wanted more flexibility than that.

I agree with playing it by ear; a UTMA account would allow them to use it for any purpose whereas a 529 has to be used for education.

I have a 4-year old granddaughter and a 2-year old. I'm still working at catching up the 2-year old's 529 to be in line with her older sister's and now they're expecting a third baby!

The only practical thing I've done other than the 529s is gift them $10K recently when they bought a new-to-them house. DDIL buys the girls adorable clothes and all the toys they need from a local thrift shop, and her side of the family goes a bit overboard with more toys and clothes. Instead, I foot the bill for big-ticket items like a visit to the Aquarium in my town, a nice restaurant dinner when I visit them, etc. A few years ago we took them to a family wedding in TX; we rented a minivan that had room for the 5 of us plus all the granddaughter's paraphernalia and also paid for hotel rooms. Last month I took the 4-years old on an overnight from Des Moines to Chicago on the plane. It was a BIG success! We'll do it again- and I'm sure her siblings will be interested in something similar when they're older.

So... don't box yourself in too much now. See what they need and what they want, and provide as your circumstances and their wants/needs allow.
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Old 11-08-2018, 07:48 AM   #6
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Congratulations! Are you over the moon with this good news? Whatever you do, I imagine you’ll want to repeat for other grandchildren should they make an appearance?

DD’s inlaws just give our two mutual grandkids (written to the parents) generous checks for every occasion which DD and her DH then put into a 529. We can’t be that generous for them or our other two but we’ve just never restricted or specified what to do with gifts to them. Young parents today seem to plan better than DH and I ever did anyway—maybe ask your kids if they have a preference?

A UTMA/UTGA will count as a child’s asset and will be calculated against potential financial aid FinAid | Saving for College | UGMA & UTMA Custodial Accounts
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Old 11-08-2018, 08:58 AM   #7
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As the recipient of financial gifts, for myself and my children, you may want to think about the emotional as well as practical implications of financial gifts.

Do you consider it a sentimental gift, a symbol of your work and love? Or is it a transfer of wealth, to reduce a future tax bill? Or something else? It helps to understand the intention with which the gift is given.

Have you talked to your child about the gift? Does your child agree with you that the gift is appropriate, or does your child have different ideas on how to approach this child's finances?


It may seem a bit over the top to ask these questions before the baby is even born, but they may help assure the gifts are received with the same intention with which they were given.
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Old 11-08-2018, 09:20 AM   #8
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In addition to the info about UTMA assets belonging to the child and counting against college financial aid, the child's parents will have to pay the taxes on that account every year. Even if the net amount owed ends up being $0, you still have to give them the 1099 and they have to do the figuring.

You could also consider establishing a regular investment account that you own and naming your grandchild as the beneficiary. You could make gifts from that account as needed throughout the child's life and then when you die, the remainder would pass directly to the child. The possible negative here is that the assets are still yours, and you would have to use them for your own needs before you could become eligible for Medicaid. If that came to pass, then the state might try to reclaim any gifts made in the previous 5 years.
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Old 11-08-2018, 09:30 AM   #9
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My child was the recipient of a nice gift from a grandparent when our child was born (other grandkids received the same gift). The intention from the grandparent was that it be used for a house down payment some day, to set up a business, grad school, etc. It is sitting in our brokerage account under our names and we will give it to our DD when she is an adult.



Another set of grandparents have been very generous in other ways (small gifts throughout the year, babysitting, etc.).


Both are equally appreciated.
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Old 11-08-2018, 09:35 AM   #10
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Originally Posted by athena53 View Post




So... don't box yourself in too much now. See what they need and what they want, and provide as your circumstances and their wants/needs allow.

That’s what I’m trying to do. I try to hold myself back from buying too much for my kids and grandchild.

I set up a 529 account and contribute a pretty nice amount to it monthly. However, I know my daughter and husband are planning on at least one more child and I need to think ahead and not “box” myself in.

I will try to be as equal as possible for each grandchild. So I plan to go lower with monthly 529 contributions but with higher initial amounts for every new 529 account that I will need for future grandkids.
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Old 11-09-2018, 08:51 AM   #11
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We have done two things. The first is an edu fund that we contibute to annually for each grandchild. Currently there are 2. We started at birth. We will adjust annual deposit amounts as required.

Second was our wills. First payout from our estate will be $100K for each grandchild to be used for post secondary edu. We anticipate increasing or decreasing this amount as time progresses. We re visit our respective wills every 3 years or so.

Our primary goal is to ensure that there are no financial impediments to our grandchildren's post secondary or graduate school aspirations. Secondary is that they do not have the financial burden of edu loans post graduation. Gift tax is not an issue in our jurisdiction.
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Old 11-09-2018, 09:05 AM   #12
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Why not do both, a 529 plan for college in 18 yrs and a tax efficient etf or mf for ongoing needs held in the parents or grandparent name?
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Old 11-09-2018, 09:11 AM   #13
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My grandma bought my kids zero coupon bonds that matured at 21. It was a nice chunk of change when it came due, but I got nominee interest every year. It wasn't a big deal, tax-wise, just reported what was on the 1099-IOD, then subtracted off that amount as nominee interest. The kids didn't make enough to have to file or trigger the kiddie tax.


But I wouldn't do zeros or gifts to minors because you have a tax form to deal with every year and it impacts college financial aid.


529 is the way I'd go. You can shift it to any blood relative and get it out without paying taxes on the gains if the go to college. You've got to figure that in the next couple of decades someone will go to college. If they don't, you just pay tax on the gains, plus an additional 10%. So if you pulled out 1000 and it had 500 gain and you were in the 15% bracket, you'd net 750 after tax.
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Old 11-09-2018, 07:18 PM   #14
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We are paying for a private elementary.school for our 2nd grader.granddaughter. Since we itemize taxes, a 529 can allow a tax savings up to $10k a.year for her. Previously it was just for college and trade school students.
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