Giving Money to the Grandkids
Smart Planning is Key
By Tom Giltner and Court Creeden
Gifting to your grandchildren is one of the most meaningful ways to leave a legacy. If done right, the financial impact can be significant and lasting regardless of the dollar amount contributed.
The challenge for many grandparents is finding the most effective way to achieve their gifting goals. There is no shortage of options and strategies, which can lead to confusion and, ultimately, inaction. The key is to keep it simple, understand the impact, and communicate your intent.
What’s Your Goal?
The best athletes visualize success. They can feel the golf ball striking the sweet spot on their club as they stick their approach, or hear the sound of the net swishing on a perfect jump shot when they close their eyes. You should do the same thing when you consider the impact of your gift.
What would mean the most to your grandchildren, and how will your gift impact their lives? Think of the first job offer they accept after completing the education you helped provide for them. Imagine the joy and excitement you will hear over the phone when they share the great news. What kind of impact do you want to achieve?
Does a planned birthday check make sense, or would you rather help with education, the purchase of a first home, provide seed money to start a business or help them to travel the world? The answer to these questions can help customize your goals.
After you decide what you would like to achieve, consider what type of savings or investment vehicle is most appropriate. Professional help is often the best option. Saving accounts, state-sponsored 529 plans, life insurance and CDs are just a few options. Each has its advantages and disadvantages, and you should understand why you’re executing various strategies before making a commitment. Ready, aim, fire — not ready, fire, aim.
Talk About It
Just as important as choosing the best way to give money is talking about your intent with your children and grandchildren.
Your grown children may have plans that you could either complement or unknowingly counteract with your gifting strategy. Talking to them about your plans could avoid possible heartache and confusion.
For example, financial aid for higher education is a critically important aspect of a family’s financial plan. If your gift were to arrive at the wrong time and in the wrong fashion, it could have a negative impact on your loved ones’ ability to obtain scholarships, grants or other financial aid.
Your generosity could have a greater impact than you probably realize, but before you take your first step down this path, be aware of your own needs and obligations. The last thing you want to do is to execute a gifting strategy that leaves your own finances short for future needs. Remember, if the air pressure in the cabin drops, put your oxygen mask on first.
A clear vision and well thought-out strategy will go a long way toward making your gift a success.
Securities, investment advisory, and financial planning services offered through qualified registered representatives of MML Investors Services, LLC Member SIPC (www.SIPC.org). 4350 Congress St, Suite 300, Charlotte, NC 28209. (704) 557-9600. Parent Financial is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies.
The views expressed here are those of Tom Giltner and Court Creedon. Their views are not necessarily those of MML Investors Services Inc. or its affiliates and should not be construed as investment advice.
Parent Financial nor its representatives provide tax or legal advice. Please consult a tax or legal professional for such guidance.
Tom Giltner works for Parent Financial, 6500 Rockside Rd. Suite 370, in Independence. He can be reached at 216-520-2160