Legal Matters
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Grandparents Day is September 12! Many generous grandparents are sources of both homemade cookies and dough – yes, the green kind. Several financial articles recently discussed whether to give adult children early inheritances sooner rather than later. Here are 5 ways early giving can complement your estate plans.
1. Memorabilia. Bradford & Holliman often recommends to clients that memorabilia be given to loved ones outside of wills and trusts for two reasons:
- You enjoy seeing the recipients appreciate and use your gifts
- Your executor will be grateful when implementing your estate plan.
2. First Homes and Tax-Free Gifts. If two grandparents and two parents each give an adult child and his wife $15,000 each, the total of $180,000 could be a serious down payment or possibly even pay for a first home. In contrast, if the couple receives the funds is in their 60s or even 70s, the funds are not as impactful.
3. College Funds. When two grandparents choose to make a $30,000 birth gift (that’s the year before the first birthday) to a new grandchild, that money is now out of their estate and can grow into a substantial college fund. A birth gift could fund a 529 college savings plan or prepaid tuition plan that offers tax and financial aid advantages. 529 plans may also be used to save and invest for K-12 tuition. The downside to a 529 plan is the use restrictions. What if a grandchild does not decide to go to college? Yes, some workarounds exist and seem to be increasing, but the restrictions should be considered carefully. A birth gift can be invested in a UTMA account (Uniform Transfers to Minors Act) without setting up a trustee or guardian since a UTMA account requires only a custodian who could easily be a grandparent with good investment experience or parent. There is no restriction, however, a downside is that the child receives full access to the account when the age of majority is reached; 19 in Alabama.
4. Age-Appropriate Gifts. Wills and Trusts can specify that heirs receive access to inheritances at different ages. You can define portions around estimated college ages, first home ages, and future grandchildren. One warning though- a standard downloaded one-size-fits-all form will not be customized to your specific situation and cannot ask you all the relevant questions that a qualified estate attorney will.
5. Growing Family. A living trust with co-trustees usually has provisions for the trustees to handle financial affairs. A provision can ensure that a new grandchild receives a birth gift endowment even if born after the primary grantor passes away.
The key to all of these options is to talk to a qualified estate planning attorney who knows your situation.
-Melanie B. Holliman, JD
Partner at Bradford & Holliman
Estate Planning, Trusts & Special Needs
205-663-0281
No representation is made that the quality of the legal service to be performed is greater than the quality of service performed by other lawyers.
