Considering gifting to grandchildren and sharing your wealth? Gifting assets to your grandchildren can reduce the size of your estate and the tax that will be due upon your death and it can assist those family members to achieve a better start in life. Grandparents want to provide for a brighter future for their grandchildren, but it is important they proceed mindfully with a financial gifting plan.
You may give each grandchild up to $14,000 a year, as of 2015, without having to report the gift. If you are married, both you and your spouse can make such gifts. For example, a married couple with four grandchildren may give away up to $112,000 a year to their grandchildren with no gift tax implications. In addition, the gifts will not count as taxable income to your grandchildren (although the earnings on the gifts if they are invested will be taxed). You can also make gifts to trusts established for the benefit of a grandchild as well.
You can pay for educational and medical costs for your grandchildren. You must be sure to pay the school or medical provider directly. There is typically no limit to these types of gifts, so you can, in essence, pay for these expenses in addition to making an annual gift up to $14,000. Moreover, you can reduce your estate by providing funds for the higher education of a grandchild by utilizing a 529 college savings plan account. Surveys have shown that 85% of gifting done by grandparents is money provided with the intention of contributing to the educational costs of their grandchildren. Therefore, it is important to proceed in a deliberate manner when making gifts to assist your grandchildren for both present and future expenses.
However, if you are considering gifting as a part of an estate plan geared toward achieving eligibility for Medicaid coverage, then it is important that you consult with an estate planning and elder law attorney because such gifting could potentially cause a penalty or waiting period for achieving Medicaid eligibility and interfere with your ability to access the coverage you may need.
If you have questions in regards to gifting, it is advisable to contact your estate planning and elder law attorney for more information. Keeping you informed are the trusted attorneys from Browning & Meyer Co., LPA. Please contact our law office with any questions.