Best way for grandparent to give to grandchild

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Topic Author
dekecarver
Posts: 704
Joined: Mon Feb 22, 2010 9:24 am

Best way for grandparent to give to grandchild

Post by dekecarver »

Good morning all,
I recently had a discussion with my father who informed that he has established a fund for my 9 year old(his only grandchild) and also has a KEOUGH account that he no longer funds that he will probably leave for for him. I did not get into details with how this was being established as my father does not appreciate such discussion. I respect his stance, its his $ to do what he wants with it; however, if the topic comes up again I'd like to at least be able to offer feedback regarding options in terms of tax efficiency etcbased on any additional info he shares. Additionally I asked him some time ago that if he did such a thing, to keep my only sibling in the loop so there are no surprises etc..

I'd appreciate feedback on what would be wise options when it comes to a grandparent establishing accounts for a 9 year old. My father is in his late 70s with health concerns.

Thanks in advance
livesoft
Posts: 86075
Joined: Thu Mar 01, 2007 7:00 pm

Re: Best way for grandparent to give to grandchild

Post by livesoft »

The thing to avoid is having a secret account in the child's name that they are taxed on and you don't know about it because then you would not file a tax return.

Some possibilities:

1. 529 plan with child as beneficiary and grandparent as owner.
2. Joint account with grandparent as primary owner and child's name also on the account.
3. Grandparent account without child mentioned anywhere on the document, but grandparent mentally marks this account as child's account.
4. Grandfather doesn't have a separate account, but puts child in his will.
5. Grandparent opens an American Century Giftrust UTMA which has high fees, but no tax return needs to be filed by child. Maybe other firms have this, too. Child owns the account and will need to declare it on a FAFSA in the future.
6. Grandparent makes child beneficiary of IRA, Keogh, etc., so no adjustment to a will necessary.
7. ….

Best way for the child is probably to have child the beneficiary of grandparent's huge Roth IRA.
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Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Best way for grandparent to give to grandchild

Post by Grt2bOutdoors »

Adding to Livesoft's list:

1. Grandfather has savings account titled Grandpa ITF or POD Grandchild
2. Grandfather has savings bonds preferable Series I circa 2000-2001, Grandfather POD Grandchild :D
3. Grandfather has will set up to leave money in trust for grandchild
4. Grandfather has whole-life policy bought years and years ago, now changes beneficiary to that of Grandchild
5. Grandfather leaves a thick sealed envelope to be opened after passing on - in it is a stack of bills. Totally untraceable......
6. Grandfather opened a UTMA account at a lower cost fund company, no taxes need to be filed for earnings below $2K annually. You become successor custodian for child perhaps down the road, otherwise grandfather will turn assets over to child when appropriate time comes.

P.S. Nice of your father to think of grandchild and leave him something whether it be a letter or financial assets or both. :beer
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JW-Retired
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Re: Best way for grandparent to give to grandchild

Post by JW-Retired »

If your grandparent does use a 529 it's best if he designates you (or the child) as the successor account owner. Otherwise it goes into his estate, which could mean significant changes to it should it end up with a different owner.
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Topic Author
dekecarver
Posts: 704
Joined: Mon Feb 22, 2010 9:24 am

Re: Best way for grandparent to give to grandchild

Post by dekecarver »

Thanks for the current responses.
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