As an estate planning attorney, I often meet with grandparents who want to provide financial support for their grandchildren while avoiding unintended complications. Whether you’re considering funding college expenses or creating a lasting financial legacy, careful planning ensures your gift achieves maximum impact.
Key Considerations
Financial gifts to grandchildren can influence two critical areas:
- College financial aid eligibility through the FAFSA process
- Tax implications for both you and your grandchildren
The good news? With thoughtful strategies, you can structure your support to reduce these effects while maximizing the benefits for your grandchildren’s future.
Effective Giving Strategies
Here are some options to consider:
529 College Savings Plans
Recent FAFSA rule changes make 529 plans an even better option. Grandparent-owned 529 accounts no longer negatively impact financial aid eligibility as they once did. This allows you to fund education while preserving potential aid.
Trust Structures
Setting up a trust offers:
- Controlled fund distribution at specific ages or milestones
- Protection from creditors or divorce
- Flexible fund usage
- Tax benefits across generations
Annual Gifting
Utilize the annual gift tax exclusion to your advantage. In 2025, you can give up to $19,000 per grandchild annually without incurring gift tax. For married couples, this amount doubles to $38,000 per grandchild.
Timing Is Key
The timing of your gifts can significantly impact financial aid eligibility. For example, waiting until after graduation to make larger gifts may be more beneficial than giving during college years.
Ultimately, your goal is not just to transfer wealth but to do so in a way that enhances your grandchildren’s opportunities while preserving other forms of support.
Our knowledgeable team can help you design a gifting plan tailored to your goals and your grandchildren’s needs. Contact us at 724-841-1393 to schedule a consultation and start building a meaningful legacy for your family.
