How to Invest for Your Grandchildren’s Future
If you’ve worked hard to create a comfortable life for your family, you want to ensure your grandchildren are able to enjoy some of the benefits. Using your legacy to help them get ahead in life can be rewarding for you, offer some financial relief for your children, and prove to be a generous leg up for the next generation.
Investing for your grandchildren now can help bolster your family in the future—within your lifetime and even after you are gone. Here’s how.
Start Savings and Investment Accounts
Uniform Transfers to Minors Act/Uniform Gifts to Minors Act (UTMA/UGMA) accounts offer flexibility with few restrictions.
You can also set up a tax-advantaged custodial retirement account for them when they get their first summer job. Funding an IRA for your grandchild from a young age or offering to match contributions they personally make will give them a head start that will pay off over a lifetime.
Set up a Trust
One of the most common ways for grandparents to pass down wealth is through a trust. Despite ideas you may have about “trust fund kids” trusts are not just for the exceedingly wealthy. It’s a tool anyone can use for passing along money to an heir or beneficiary.
With a trust, the funds remain controlled by a trustee until the child reaches 18, 21, 25, or another age specified by you. You can also specify that certain amounts are released in increments. Between ages, trust principal can be distributed to the child for purposes of health, education, maintenance, and support.
The Gift of a Grandparent
If you are in the position to pass money on to your grandchildren, that alone is a gift and they are fortunate to have you. But as you consider what you will provide for them, keep in mind that the annual individual gift tax exclusion in 2022 is $16,000.
When choosing how to structure your gift, think about how you can set them up for success—and be sure to teach them what you know or point them in the right direction to learn. Financial education is priceless.
John A. Frisch, CPA/PFS, CFP®, AIF®, PPC™ founded Alliant Wealth Advisors in 1995 and has over 30 years of experience as a financial professional. In his free time, he’s an avid long-distance runner, a sport that requires discipline, patience, and vision. John applies these same skills to his professional pursuits: He helps families and retirement plan sponsors adopt a patient, disciplined approach to overcoming financial challenges and reaching their distant goals along a clear path. Learn more at www.alliantwealth.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.