Estate planning as a grandparent can include providing educational opportunities if you have grandchildren who are still of school age.
People who are exposed to the federal estate tax can gain tax efficiency by doing this, and of course providing your grandchildren with the opportunity to help themselves is certainly a good investment.
Why would paying for education provide tax benefits? This is because of the fact that you may pay the college tuition of students without incurring any gift tax liability. When you pay for school tuition you are reducing the value of your estate, and as a result your estate tax burden will be eased.
This exemption does not extend to living expenses, fees, and the cost of books. However, you may give up to $13,000 to any number of people within any calendar year free of the gift tax. So, you could use this exemption to provide some cash to your grandchildren to assist with these additional expenses.
When it comes to minor grandchildren you could give gifts in trust to be distributed to them eventually in accordance with your wishes as stated in the trust agreement. Another possibility would be to place funds into custodial accounts under the Uniform Gifts to Minors Act.
One may also pay for health insurance premiums as a gift to others free of the gift tax, and this is another thing that you may want to do for your grandchildren.
With the proper planning you can oftentimes gain tax benefits while you pave the way for the future successes of those that you love.
- Important Subjects to Discuss with Your Estate Planning Attorney - January 23, 2023
- Planning for the Possibility of Dementia - January 20, 2023
- How to Prepare for Retirement - January 17, 2023