<p>My parents would like to gift each of their 15 grandchildren some money. They range in age from 10-30. They don’t want to give them cash because some are not ready for handling money like that. They also don’t want to give it to the parents because some would not handle it wisely. They want to do exactly the same for all. They want to do this both to lower the value of their estate and to provide for the grandchildren once they are gone. </p>
<p>Given those constraints, can anyone suggest a way to give them a lump sum of money that the children or their parents would not know about until such time my parents feel they are ready for it or when they are gone? They can’t open savings or brokerage accounts because the income is reported yearly. I suggested U.S. savings bonds but apparently you can only buy those online now and the recipient must open their own account.</p>
<p>I’m not an expert on this…but seems to me they could set up a trust with an amount in it…and the trust document would indicate when the money becomes available to the kiddo…and who manages this.</p>
<p>I will say…I do not recommend this at all…doing this as a secret thing. If the money is in the names of the kids, it is a reportable asset on the financial aid application forms,whether or NOT the kiddo has access to the money. This could cause issues in the future if these families apply for need based aid.</p>
<p>In addition, one never knows when the money may actually be needed, and for a good reason. For example…say one of those grandchildren is in their last year of college and their parents die or lose their jobs for some reason. The kiddo might actually benefit from being able to use that money for the final year of college.</p>
<p>The more strings they attach to this gift, the more difficult it will be to set it up. </p>
<p>I would suggest talking to a lawyer who is well versed in estate planning to get an idea of options for this money, and to reduce their estate value.</p>
<p>They need to see an estate planning attorney.Lots of rules about taxes, inheritance etc that probably need discussing in depth.
And I’ll echo that the idea of doing this secretly is not a good idea for tons of reasons. Perhaps trusts could be set up for each grandchild who is under 21 (or pick any age) and the money just gifted directly to those over the chosen age…</p>
<p>Your parents can give a maximum of $28K to each grandchild per year. Any lump sum more than that amount will likely incur gift taxes to your parents. But there are exceptions depending on the size of their estate.
They should consult estate planning professionals.</p>
<p>They have an estate attorney. They have a rather large estate. Hence the need to reduce it.</p>
<p>Thanks for the suggestion, but need based aid is never going to be an issue. The only ones who have children not yet in college will never qualify. There will mostly likely also not be a need for this money before my parents are gone. They are now in their late 80’s.</p>
<p>The don’t want the kids to know about it now so they don’t make financial decisions based on getting this money. They also don’t want to let one of my siblings specifically know because they may do things differently knowing the child has money.</p>
<p>I am also very aware of how much they can give each child yearly. I am their accountant. The only questions is, aside from cash, how to put money aside that belongs to the kids without telling them right now.</p>
<p>So…any suggestions for what my parents DO want to do?</p>
<p>Well, it sounds as if the grandchildren are in decent financial shape at present. If there is not likely to be a need for a great while, can your parents gift into IRAs for the grandchildren? This would get them the benefit of compounding and later they could borrow against it if a need arises.</p>
<p>IRA’s would be a great idea except for two reasons: </p>
<p>The ones that are under 16 don’t make enough money to contribute to an IRA and the second is that there is no way to do that without the child and/or parents knowing about it and my parents refuse to do things differently for one grandchild over another.</p>
<p>Your parents can set up a trust for each of these grandchildren, I believe. They need to discuss an irrevocable trust with their attorney…or one who specializes in trusts. </p>
<p>Family member here was going to do this. They were all set to set up an irrevocable trust without the knowledge of the beneficiaries…which is very much allowed. If they had done this, it would have been found out after they both died. </p>
<p>They changed their mids and decided to tell us about this. The trust was set up. There are provisions for the age at which family members become beneficiaries of the trust.</p>
<p>Your parents should discuss this with their lawyer…I’m sire there is a trust vehicle that can be established to meet their goals. </p>
<p>My two suggestions had been trusts and savings bonds. A few years ago, you could just go to a bank and buy savings bonds in the name of the child and put them away. Can’t do that anymore.</p>
<p>Their objections to trusts is the fees involved. They didn’t get this wealthy without being frugal. But that just may be the only choice. It has to be pretty expensive to have fifteen trusts set up. Savings bonds would have been ideal.</p>
<p>Set up a trust with the kids are beneficiaries–they don’t have to know and there’s an independent trustee who administers it for the benefit of the recipients. We created one for our kids–they know about it and the specific conditions under which they can draw monies from it. There are other benefits to a trust, e.g., taxes. I’m far from an expert, but this worked for us. I think the best thing for your parents to do is to consult an attorney who specializes in estate planning.</p>
<p>I’m not sure 15 separate trusts would be needed. One trust with 15 beneficiaries and the conditions under which they receive their disbursement may be sufficient.</p>
In 2012 ,they could have given $5M each without incurring gift taxes. That one time window is gone now.</p>
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<p>Many people set up generation skipping trusts.The option is that they pay the fees or pay IRS after they are gone. No other way to avoid death and taxes.</p>
<p>If they have an estate planning attorney–what did they say were the options? And becoming wealthy isn’t always about being frugal–it’s about being smart with your money. Waiting for inheritance taxes to take half doesn’t seem like a smart option which they know. So that leaves trusts, outright gifts and possibly burying it in the back yard.</p>
<p>I can understand them wanting to treat all the kids the same but no parent who wants some control over a specific outcome ever treats their kids the same. Because they aren’t the same. Never will be.
I would still go for outright gift to those of age and trusts to the younger ones. That in my opinion is the fairest way with the most control probably.
If a parent is responsible–give the money to them with instructions to set up accounts for the kid.
If a parent of someone under age is irresponsible and plans differently because of the trust-- see an attorney and have the trust set up for that kid with guidelines attached.</p>
<p>As to savings bonds–gone are the years that you could get any return–see “bury in back yard” as the option.</p>
<p>funny, my dad just did that for his 9 grandkids; although he wrote checks and gave it to all of them except druggie niece directly. Ages range from 34 to 13. It was not that huge an amount, but X 9 it added up. And feels HUGE to the 4 in grad school. </p>
<p>Also, although one can only purchase $10K in your own treasury direct account, you can “gift” more than that to different people. And HOLD it. (if the amount is < $10,000 per year per person). It goes into a “gift box”. The person on the receiving end does need to get a treasury direct account to receive the bond IMMEDIATELY, but presumably your dad will want them to receive the $$ someday. He can tell them to get the account then. He would need the social security number for the kids… I just went through this for my Mom for her great grandson. Our grandparents bought us those savings bonds $25 at a time for birthday and Christmas. I paid a lot of my college expenses with them and cashed the rest for the down payment on our first house. All the Gparents were dead by then, but I sure felt their love when we got the key to the house. </p>
<p>I have the social security numbers of all the grandkids. I do most of the tax returns in the family and the ones I don’t do for the adults, I do for the kids.</p>
<p>I read through the treasury direct site and I was under the impression that they had to get an account almost immediately. Holding it would be great. Thanks esobay. So they can give $10,000 per year per child per grandparent? Or can they give up to the gift exclusion amount of $14,000?</p>
<p>Here is a thought but you would need to work quickly. Can they gift an amount before december 31, and then again after January 1 to set this up? I’m not sure exactly where that money would go before December 31 until the trust is set up.</p>
<p>Trusts are one way, 529s another. Writing them in their will, for those amounts, yet another with the amounts earmarked and tracked for each in a general account. If things come up where the money is needed, the grandparents can take the money and give it to the ones who could use it for approved things possibly in form of a loan and have it accounted for so that upon death, those who used their money get less than those who didn’t.</p>
<p>My friends parents did that with their daughters. Four girls, each had amounts earmarked for them and the amounts were drawn as things occurred and parents felt it should come from those funds. The parents are still alve , the “girls” are now middle aged, some with college aged kids themselves, and by now, the funds have been distributed. </p>
<p>That’s the whole purpose of a will, to distribute assets to those one wish to do so, but it can drawn up so that the amounts are put away and drawn from as when owners feel it is reasonable as loans. My husband’s grandmother did the same. Upon her death, any amounts her children borrowed from her was forgiven but taken from their share of the estate that was going to them.</p>