Best Gifts for the Grandkids

By Deborah Jeanne Sergeant

College, starting a new business, buying a house: starting out costs a lot of money. If you plan to financially help out your grandchildren, plan your gift so it benefits you both.

Adam Mark, certified financial planner with Wealth Management Group in Rochester, said that giving your grandchildren financial gifts “can lighten the estate taxes.”

Giving now, instead of waiting until you die, also helps your grandchildren at a time when they can use the money the most.

Jeff Feldman, certified financial planner and owner of Rochester Financial Services in Pittsford, said that college students may lose their ability to receive financial aid if they suddenly experience a large influx of cash. Discuss your options both with your adult children and grandchildren and a financial adviser.

Using a 529 plan (www.nysaves.org) can provide tax savings to you (up to $10,000 is deductible for married and filing jointly and $5,000 single tax payers). Qualified withdrawals — such as to pay for college tuition, room and board, schoolbooks and learning equipment — are tax free. Otherwise, the money is taxed and also penalized 10 percent.

It’s free to start and costs $1.60 per $1,000 per year to maintain the account. The maximum 529 one-time gift is $70,000. The student may attend any qualified college, university or trade school in any state or abroad.

Anyone can give $14,000 a year without having to file a gift tax return.

“If you have less than $5 million in your estate, it has no implications,” Feldman said. “It’s just a paperwork thing. There’s no income tax for recipient and no deductible for the donor.”

He said that many people feel they must give the same amount to each grandchild; however, if one family is affluent and another more needy, grandparents should give where the need exists.

“It’s up to you” Feldman said. “They should love you regardless of what you give. It’s your money and you should feel free to give what you want.”

Some young people want to start a business, not attend college. Before handing over sizeable amounts of cash to a grandchild who envisions himself as the next Mark Zuckerberg, insist upon seeing a business plan and discussing the plan with a financial adviser and someone savvy to that industry so you can fairly assess the potential risks. Don’t endanger your own financial future to make such an investment. Your grandchild can bootstrap the business, take out his own loan, or start a social media funding page.

Helping your grandchildren purchase their first home, rental property or make other investments can help them prepare their own financial futures.