National Grandparents Day: 3 Key Considerations Before Gifting to Your Grandchildren
As grandparents, you probably cherish the opportunity to shower your grandchildren with gifts, especially during holidays and birthdays. Seeing their excitement as they unwrap a much-desired toy like a new doll or race car is immeasurable. While these gifts can leave a lasting impression on your grandchildren, you may have also thought about leaving more substantial and meaningful gifts that can have a lasting impact, such as contributions to their savings, education, or first home. Here are some key points to consider when planning these types of gifts:
- When Should You Give the Gift?
Timing is an important factor in deciding when to give a gift. For older grandchildren exploring college options, providing funds for their education might be beneficial now. Similarly, if you have adult grandchildren preparing for major life events like buying a home or planning a wedding, an early monetary gift could be helpful. Giving gifts during your lifetime allows you to witness their impact and the joy they bring.
However, there are times when a gift given after your passing can be just as meaningful. For younger grandchildren, who may not yet be thinking about postsecondary education, buying a home, or starting a business, a gift left in your will or trust might be more fitting. Although this kind of gift comes later, it can still offer significant support for their future, provide essential financial assistance, and create a lasting memory of your love and generosity.
- Can You Afford to Leave a Gift?
It is important to assess whether you can afford to give a significant gift without compromising your own financial stability. Consulting with a financial advisor can help you develop a long-term plan that balances your financial goals with potential future costs. For example, the Administration on Aging estimates that at least 70% of people over 65 will need some form of care. [1] Notably, the national median annual costs for nursing home care in 2023 have risen to approximately $108,405 for a private room, compared to $92,376 in 2016. [2] The average length of stay in long-term care is 3.2 years. Just over 20 percent of residents will require care for 5 years or longer. [3] For those who are married, it is important to evaluate both your own and your spouse’s current and future needs. Given the increasing costs of care, you should consider whether your surviving spouse will depend on your remaining funds for their financial security.
If gifting a large amount seems impractical given your financial situation, consider working with an estate planning attorney to create a plan that aligns with your resources and goals. This can help ensure that any gifts you intend to leave are feasible and appropriately timed.
- What Impact Will the Gift Have?
Lastly, it is important to consider both the potential positive and negative aspects of gifting to your grandchildren. Gifting can allow your grandchildren to have new experiences, build a nest egg, and invest in their future. Ultimately, these gifts can result in a profound and lasting impact on your grandchildren’s future.
The way a gift is structured can affect your grandchild’s eligibility for educational assistance by influencing the amount of assets reported on their Free Application for Federal Student Aid (FAFSA). In certain cases, giving a substantial amount of money to a child or young adult might discourage them from seeking or keeping employment or from continuing or completing their education. Such large gifts can create a false sense of financial security and may lead to excessive or irresponsible spending.
It is important to carefully consider the potential unintended consequences of gifting. Fortunately, many of these negative effects can be addressed by collaborating with an experienced estate planning attorney who can develop a strategic plan to leave an inheritance while avoiding common pitfalls. If you want to ensure that your gifts to your grandchildren are protected and have a lasting impact, Wilson Law can help you craft the ideal approach. Contact us at 866-603-5976 or complete our contact form to schedule your consultation.
[1] Claire Samuels, Long-Term Care Statistics: A Portrait of Americans in Assisted Living, Nursing Homes, and Skilled Nursing Facilities, A Place for Mom (Dec. 13, 2022), https://www.aplaceformom.com/caregiver-resources/articles/long-term-care-statistics
[2] Jeff Hoyt, Nursing Home Costs in 2023, SeniorLiving.org (Aug. 18, 2023), https://www.seniorliving.org/nursing-homes/costs/#national-median-costs.
[3] Samuels, supra note 1.
