Helping out family members is to be encouraged, but can raise a number of legal issues involving taxes and eligibility for public benefits, as well as questions of fairness among family members. Here are six issues grandparents should consider before making gifts to family members.
Are you planning a gift to your grandchildren? Grandparents normally have a strong desire to take care of their grandchildren. They want to make sure that the grandchildren have everything they need. Often this means that grandparents will make ill-advised gifts to the grandchildren. There are some things that need to be considered to make sure that any gift you want to make is appropriate. In an article titled "Six Things to Consider Before Making Gifts to Grandchildren," JD Suprapublished a list of things to consider.
The list includes:
- Gift or Loan - Make sure you really want to give a gift. If you expect to be paid back, it is a “loan” and you should get the terms in writing.
- Equal Treatment - If you give more to one grandchild than another, it could cause resentment within your family.
- Tax Requirements - Consider whether the gift is taxable and make sure you report any gifts that need to be reported.
- 529 Plans - If the gift is primarily for educational expenses, then it might be a better idea to use a 529 college savings plan.
- Keep What You Need - Make sure you do not give so much money to your grandchildren that you are unable to meet your future expenses.
- Long Term Care - When deciding how much to give, include the potential costs of your own long term care in a nursing home as part of the money you might need in the future to meet your own expenses.
The above list is not exhaustive. There are many other things you might want to consider before making a gift to grandchildren. Talk to us about gifting and how it can fit into your overall estate plan.
Reference: JD Supra (September 4, 2014) "Six Things to Consider Before Making Gifts to Grandchildren"