Last week in our Geyer Law blog, discussing college planning after a parent dies, we discussed the important role college funding plays in estate planning for both parents and grandparents. A recent piece in Kiplinger’s, in contrast, discusses the very broad – perhaps too broad – role many grandparents play in the financial lives of their grandchildren.
“The relationship between grandparents and their grandkids is incredibly special,” Kathryn Pomroy and Erin Bendrig concede, citing a study published by Senior List finding that 96% of grandparents provide financial help to grandchildren, including not only gifs, vacations, buying a car, or making a down payment on a house, but also contributing to college costs.
The problem to which the authors are calling attention is that too often grandparents undermine their own financial stability by:
- living a more frugal lifestyle themselves
- pulling money from a savings or retirement account
- deferring – or coming out of – retirement
- Incurring debt
.In working with our estate planning clients at Geyer Law, we discuss different options for assisting grandchildren using 529 education savings plans, taking advantage of annual gift tax exclusions, and creating trusts to transfer wealth. And, while we are not wealth managers or financial planners, we work together with those professionals to find the most tax-efficient ways for grandparents to protect themselves while providing help to younger family members –both now and later. As we mentioned last week, “Trusts can be established (either revocable or irrevocable), with instructions to the trustee to pay tuition and other education expenses.”
As estate planning advisors, one of the things we found most startling in the Senior List study was the percent of participants who agreed with the following two statements:
- “I feel an obligation to ensure my grandchildren never go without, even if it strains my finances” – 39% of respondents
- “I prioritize my grandchildren’s needs over my own financial stability” – 30% of respondents
As longtime Indiana estate planning attorneys, we’ve learned the value of facilitating family conferences. Certainly college age grandchildren can be invited to participate in these talks. Not only will the younger generation become acquainted with us as members of their parents’ and grandparents’ advisory team, the grandparents will have the chance to openly share the values and assumptions that have gone into their estate planning choices, along with their reasoning when it comes to helping grandchildren.
– by Ronnie of the Geyer Legal Group, PC blog team
