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Important Tips for Grandparents about Giving
If you enjoy supporting your
grandchildren financially – or if this is one of your goals – you’re not alone.
Eighty-four percent of seniors say that creating a financially secure life for
themselves and their family is an important goal.1
Yet, deciding how to best help
your grandchildren can be a struggle, especially if you share some of the same
financial concerns as your peers. For example, you may be among the 27 percent of
seniors who say changes to Social Security are most likely to jeopardize your retirement
plans or the 23 percent who identify healthcare costs as the biggest threat.
When evaluating how much
financial support to provide, consider the following:
only what you can afford. Your own financial security should be
your first priority. Since there is no way to know with any certainty how long
you’ll live, how the market will perform or how inflation may impact your
purchasing power, make sure that you gift within your means. Doing so will help
ensure your generosity today doesn’t create a financial hardship for you — or
your family members — down the road.
equally. To help prevent family conflict and avoid damaging
relationships, give equally to your grandchildren to the best of your ability.
If you need to give more to help one of them through a rough patch, consider
adjusting your will to even things out and clearly communicate your intentions
to everyone involved.
whether you’re making a loan or giving a gift. If
you’re giving a gift, familiarize yourself with federal tax rules, which are
based on the calendar year. For example, in 2012 you can give up to $13,000 to
each of your children and grandchildren before the federal gift tax is applied.
Also, be sure the recipient knows it’s a gift to alleviate any uncertainty
about whether they’re required to pay you back.
If you are loaning money to
a grandchild, be very specific about the terms and repayment, and make sure you
have a written document that both parties sign and date. This will help
safeguard your financial situation. This will help safeguard your financial
situation and ensure both of you are on the same page – now and in the future.
your intentions. Only 61 percent of seniors say they
regularly discuss money and finances with their family. If you would like to
help support your grandchildren or save for their future goals like college or
a down payment on a home, be sure to communicate this with their parents. This can help your
adult children do a better job with their own financial planning. For example,
if the parents of your grandchild know how much you are expecting to contribute
to their child’s education, they may be able to decrease the amount allocated
to a 529 Plan and investment more toward other goals, such as their own retirement.
appropriate boundaries. Even if you want to help your
grandchildren financially, depending on their age, it may not be appropriate to
do so. For example, many young parents take pride in their financial independence.
The experience of letting them live within their own means can be an excellent
teaching opportunity. Keep in mind the smart — and sometimes tough — financial
lessons you learned as you made your own way as a new parent, and the pride
that came with successfully overcoming challenges.
If you want to provide
financial support to a family member, but haven’t incorporated it into your overall
financial plan, consider consulting a financial professional. He or she can
help you evaluate your financial needs and goals and create a strategy. A clear
and realistic understanding of your own financial picture can help you identify
how much you can comfortably give, as well as the most tax-efficient and
effective way to go about it.
1 The Money Across
Generations IISM study was commissioned by Ameriprise Financial,
Inc. and conducted by telephone by GfK in December 2011 among 1,006 affluent
baby boomers (those with $100,000 or more in investable assets); 300 parents of
baby boomers; and 300 children of baby boomers at least 18 years old. The
margin of error is +/- three percentage points for the affluent boomers segment
and +/- six percentage points for the parents and children of boomers segments.
Paul A. Pouliot,
CFP®, CHFC®, CASL® is a Financial Advisor with Ameriprise Financial Services,
Inc. in Bedford, NH. He specializes in
fee-based financial planning and asset management strategies and has been in
practice for 16 years.
To contact him:
Paul A. Pouliot,
CFP®, CHFC®, CASL®
116 South River Road
| Bedford, NH 03110
| Fax: 603.296.0028
Advisor is licensed
to do business with U.S. residents only in the states of AZ, CT, FL, GA, KY,
MA, MD, ME, NC, NH, RI, SC, TN, VA, VT and WA.