It’s the wish of many grandparents to help their grandchildren and even future grandchildren financially. But this can be a challenging task because a number of issues regarding fairness can arise. If you have many grandchildren of different ages and have been giving each one of them different gifts since birth, the amounts, you can notice, have not been equal.
The process of balancing gifts is called equalization and only you can make the decision to equalize gifts to your grandchildren. Remember it’s important to plan and fairness does not always mean equality. Make sure you consider the wealth some grandchildren may inherit from their own parents and the chances of your grandchildren have to be successful financially. For example, let’s say you have three kids. Two of them are just making ends meet and one is a successful business married to a spouse who has a well-paid job. They can easily pay for their child’s education, wedding and so on.
In cases like this, you could, perhaps, write your will to specify transfers to all your children and only to the grandchildren whose parents are just scraping by. Your financially successful child can disclaim his/her bequest, and if that is done, it will legally pass on to his/her children. Some may feel that this method is more satisfactory than giving each grandchild an equal amount. Nevertheless, it’s a personal decision but one you should consider carefully.
Some grandparents who didn’t give much thought to equalizing gifts originally may feel differently when they get older. If one grandchild has received $10,000 over the course of 10 years and another has received $1,000, it’s understandable that you may want to even things out. One option to correct this is to stop giving the grandchild who has received more until the grandchild who received less has caught up. This approach can work for grandparents who are relatively young and in good health.
If you want to equalize gifts, make sure to begin as early as possible. It may help to get the help of a financial planner to achieve your goals too. One of the best ways to give is through a college savings plan. Grandparents can contribute to a plan already outlined by the parents or they can set up a new account for a grandchild.
Gifts for your future grandchildren
Even if you already have grandchildren, more grandchildren may be on the way. Part of the challenge of financial planning for grandchildren is planning for future grandchildren who have not been born yet. Though you can change your financial plans to provide for future grandchildren while you’re still alive, you have to give some thought on how to handle the plan for grandchildren born after your death.
In situations like this, you can give your family some leeway by including a method called special power of appointment in your will. This method will allow your spouse, child or another individual the power to change the terms under which assets to pass to your grandchildren through trust. From a legal perspective, after-born children are those who are born after the creation of a will, trust or other document and posthumous children are those who are born after the death of a parent.
Planning for the future of your children is complicated and complex enough, let alone the future grandchildren. Nevertheless, you can still make provisions for any grandchildren born after your death. Being specific as possible about any present and future beneficiaries will clarify your intention and help make sure that your wishes are carried out. Inheritance laws vary widely from place to place and it may not be practical to provide for after-born grandchildren through your will. Establishing a trust, on the other hand, can be very effective. Trusts can be established in a number of ways to address the needs of current and future grandchildren, including grandchildren who are not born yet.