![]() The CVS Group Arizona on Financial Guide For First-Time GrandparentsA Story by stephgeorge7![]() Think beyond the layettes and baby rattles to create such lasting gifts as a college education and an inheritance.![]() Becoming a grandparent changes everything "
including, often, your approach to your finances. When you hold the next
generation in your arms for the first time, chances are good that money won't
be uppermost in your mind. But it won't be long before you begin to think about
how you can help to create a solid financial foundation for this newest member
of your family. And having a strategy for incorporating your new grandchild's
future into your overall financial picture can make a big difference when you're
ready. Here's a guide to help you get started.
Giving the
gift of education.
After the layettes, car seats, rattles and other baby paraphernalia have been
purchased, the next thing you'll probably want to think about is how to help
your grandchild pay for a good education. A single year's tuition at a public
institution is expected to rise above $44,000 by 2030, and it's predicted to be
twice that much at private schools, according to the U.S. Department of
Education. Given this, the earlier you start a college savings program such as
a Section 529 college savings plan for your grandchild, the more impact your
gift is likely to have. With a 529 plan, money you set aside has the potential
to grow tax-free until it's needed, and there's no tax when the money is spent
on qualified higher education expenses. "If you start a 529 now and let it
build for 18 years, the tax savings should be significant," says Richard
J. Polimeni, director of education savings programs at Bank of America Merrill
Lynch.
Setting
limits.
Even retired people who have reserved significant resources for discretionary
spending should give careful thought to how much they plan to devote each year
to a grandchild's gifts, education and other expenses. "It's important to
balance your generosity with your retirement needs," says Merrill Lynch
Retirement and Personal Wealth Solutions National Sales Manager Amanda N. Ross.
Instead of simply giving gifts on special occasions or as needs arise, Ross
suggests working with your Merrill Lynch Financial Advisor on a thoughtful
giving strategy. One easy way to set limits is to create a defined income
stream by purchasing an immediate annuity. You can dedicate the regular income
you get from the annuity to funding gifts for your grandchild over a predetermined
number of years.
Creating a
trust.
Another way to set aside a specified amount of money for a child's future is to
establish a Uniform Gift or Transfer to Minors Act (UGMA/UTMA) account. In a
typical arrangement, grandparents put money into a UGMA/UTMA account that can
be used only for the benefit of the youngster. Either you or the child's
parents are listed as custodian, and the custodian can make spending decisions
for the child until he or she reaches the age of majority in his/her state of
residence.
The primary drawback to a UGMA/UTMA is that once
your grandchild comes of age, he or she is free to spend the assets at will. To
exercise more control over when the money is used, some states' UGMA/UTMA laws
may allow you to extend the age at which your grandchild gains control of the
assets. Because of the expense involved in setting up and maintaining them,
trusts may not be right for every situation, Ross says, "but they do give
you an added degree of flexibility to customize your giving."
Reviewing
your will.
You now have a potential new beneficiary, and you should make sure that your
will reflects that. In your current will, you may have stipulated that the
inheritance will go to your daughter and her husband, on the assumption that it
will also be used to care for any grandchildren. But what if family
circumstances change " your daughter dies and her husband remarries, for
example? There's no guarantee that your grandchild will receive the benefit you
intended. To make sure that your grandchild receives the inheritance you want
to leave, Ross suggests, you might establish a trust for the grandchild and
indicate which assets you'd like placed in the trust after your death.
Set up an appointment to talk with your Merrill
Lynch Financial Advisor about these and other strategies soon after the birth
of your first grandchild, suggests Ross. That way you can enjoy your new role
as a grandparent to the fullest, without worrying about your own retirement
security. And remember, your first grandchild may not be your last. Continue
reading…
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Added on January 20, 2015 Last Updated on January 20, 2015 Tags: The CVS Group Arizona, Tokyo Japan, Hongkong, Singapore Global Wealth Manageme |