Transcript:
Easan Arulanantham:
So what’s the best way to give gift money to my grandchildren, if I was wanting to maybe think about a larger sum of money than usual?
Tom Vaughan:
Yeah, I mean, you can gift up to 15,000 per person. So if you are married, you could actually give 30,000 to a grandchild. And, you know, if you’re not, then just the 15, maybe you don’t want to do that much, you can always do less to those limits will, if you stay within those limits, then it doesn’t affect your estate tax exemption. And so what happens there is, there’s a lot of different ways to do it. I think for the most part, what I’ve seen with grandchildren is something oriented towards college. I have also I’ve seen with children’s, especially adult children, the children that have those grandchildren, for example. I’ve also I’ve often seen cash, these give cash, right? Every year, they give cash, it’s a way to kind of keep this state in check for people that have some excess money, and they want their their kids to get something out of it now and they need it, they got kids and school and those types of things. But for grandchildren, what I normally see, you know, you’re assuming they’re younger, and a lot of cases is cash, they can do cash, that’s for sure. But the oftentimes still contribute to a 529 Plan.
So a 529 Plan can be used by the grandchild, for college. And any growth that you get inside that plan is tax free, as long as the money is used for college. And so that that’s a strategy that I see used, the most for grandkids is kind of a gifting into this college fund. There’s some disadvantages, what if they don’t go to college 529 Plan can be pointed to somebody else. So if there’s three grandchildren and two of them going window, you could point the other one that didn’t go towards the both of the other ones that did go. So that’s kind of neat, there’s a little bit of flexibility. But you know, that’s that’s where sometimes the cash gift is a little better it depending on you know, what you think might happen for that child in terms of college, or a combination of both, like a 529 and some cash, right? So, but that’s it’s fairly straightforward. As far as that goes, if you do set up a 529 Plan, and you can just keep contributing to it each Christmas, if you wanted. And that’ll be kind of your legacy, you know, helping that college is expensive, and getting more expensive and growing at much faster than the rate of inflation. So being able to help with that is great. And so anyway, Oh, one other quick thing. 529 plans now also allow to pay for private school, like a high school, private high school, so And sometimes, you know, your kids, if the grandkids are trying to go to there, they’re having to pay for that. So you might be able to help with that to the 529 Plan, especially if they’re younger. And that might become later because then you get that tax free growth for a longer period of time.
Easan Arulanantham:
Yeah, going off on topic too. If you want to pay above that 15,000 There’s some qualified expenses that you could pay for someone else and not be considered gift. Yeah. And so say they’re going to private school and it costs $20,000 A year and you’re single, or you’re single household. You could pay if you pay directly to the school and bypass that grandkid. It won’t count against your gift. So you could do that to kind of exempt you’re there. And 520 nines are becoming more flexible. You know, they’re starting to include trade schools. So you even if they don’t actually go to college, there’s still other options.
Tom Vaughan:
Yeah. Yeah, my kids went to Harker Academy, and they had grandparents day every year, because there were a fair number of grandparents paying the bill. And that’s exactly right. That’s what they can do. And, you know, because that’s one way around that $15,000 gift. So that’s that’s good point. Yeah.