“‘Trump accounts’ come with a baby bonus of $1,000, funded by the Department of the Treasury,” Jessica Dickler points out in a CNBC piece on personal finance. The author is referring to the fact that under the new legislation, children born in 2025 through 2028 who are U.S. citizens will receive a $1,000 deposit to their account, with parents and others, including parents’ employers able to contribute up to $5,000 a year into those accounts. The government’s money will be deposited in each account this time next year; funds will be invested in a fund tracking a U.S. stock index. Similar to IRAs, earnings will grow tax-deferred, with withdrawals taxed as ordinary income.
Although the more familiar 529 plans will remain available for education planning, “if the government is giving you free money, you should take it,” one financial advisor interviewed by Dickler remarked.
While at Geyer Law we offer no investment or tax advice, instead coordinating with clients’ financial planning and tax advisors, the announcement of these new plans has triggered many estate planning questions from grandparents seeking the best way to help their grandchildren fund college costs or start businesses.
Often grandparents who have ample resources want to help with grandchildren’s summer camp fees, college tuition, wedding costs, or the down payment on a second home, New York attorneys Rheinhardt and Bray observe. Feeling able to relieve pressure on their children, they want to give grandchildren opportunities that would otherwise be out of reach for them. However, helping grandchildren can raise issues, they point out. Is everyone being treated equally? Not all grandchildren have the same financial needs, and grandparents don’t feel equally close to all of their grandchildren.
Both true, but it is other aspects of making gifts to grandchildren that our Indiana estate planning attorneys want to make sure our older clients consider:
- Sometimes gifts to grandchildren can be seen as undermining the parents’ plans for the grandchild – or the parents’ authority (Washington, D.C.-area attorney Megan Gebhardt of the PEPS nonprofit association reminds her grandparent clients to avoid having their good intentions be perceived as intrusive..)
At Rebecca W. Geyer and Associates, we encourage multi-generational planning, and, for many families, education funding for grandchildren can be a great place to start. Still, we understand not only that elder law matters can be complex and overwhelming, but that initiating inter-generational discussions can be awkward and emotion-laden, and we help arrange family conferences so both parents and grandparents can share the values and assumptions – along with the issues – that go into any gifting of money.
- “Don’t be too generous,” Mississippi Elder Law Attorneys cautions their clients; grandparents need to make sure that they keep enough money to pay for their own future healthcare needs. “Your high-net-worth clients who self-fund LTC costs may face the unintended consequences of leaving less of a legacy to their children if out-of-pocket care expenses deplete their estates,” Pailip Herzberg and Jorge Padilla caution their fellow financial planning professionals in the February issue of the Journal of Financial Planning.
Indeed, as elder law attorneys, we have been paying attention to the reduced number of viable long-term care insurance choices being offered to our Indiana estate planning clients. Generous as their instincts may be, we know that grandparents must prioritize their own healthcare needs before making gifts to their grandchildren.
The new “Trump accounts” offer grandparents “food for thought” about creating savings vehicles for their grandchildren, but also “food for thought” about legacy planning in general!.
– by Cara Chittenden, Attorney with Geyer Legal Group, PC
