Articles - Archived Expert Advice
(Copy and paste the text into your document)Giving Money to Grandchildren
I'd like to help my grandchildren financially, but don't want to pay their bills. How can I give to them and be assured the money will be used the way I want?
The best way to make gifts to someone, yet still control how the money is spent, is to create an Irrevocable Trust. With this arrangement, you name a trustee (other than yourself) who is responsible for managing the trust for the named beneficiary. This means you give up ownership and control of that property. The trust spells out the terms and conditions under which the trustee makes distributions to the beneficiary. Unlike a Revocable Trust, you cannot change or revoke this type of trust.
Why should you give up ownership of your assets? You can control the timing and conditions under which the gift will be enjoyed. Also, "giving away" assets may reduce the value of your estate and its tax liability upon death. You may also be able to make larger gifts without incurring gift tax liability. Finally, transferring assets to a beneficiary relieves you of the associated taxes. While they will shift to them, there is a likelihood, as a child or grandchild, they will be taxed at a lower rate, thereby reducing the family's overall income tax burden. Irrevocable Trusts can also provide for education or other needs for minors or individuals with special needs.
An Irrevocable Trust can be created under your will; however, this requires legal action. In this scenario, you retain control and use of your assets during your lifetime; the terms and conditions for the gift take place after your death.
If you would like to discuss these options further, please give an LGFCU financial planner a call at 877.367.5428.
