Grandparents love to shower their grandchildren with gifts and presents. Since it’s the children that carry on the family legacy, grandparents take particular interest in passing on the family heirlooms to the new generation. Some grandparents go out of the way to help their children and grandkids who may be going through financial hardships. Most grandparents believe that inheritance is not the only possible way to help their children struggling with economic issues. But assisting a family member monetarily can present some unforeseeable legal problems. Thus, it’s best to make a search query for “probate litigation attorney near me” for advice before making a gift to your children or grandchildren.
In this blog, we have discussed a few aspects of making gifts to a family member that may raise tax or other legal issues.
Should the favor be counted as a gift: When offering money to a family member or making a gift, do you expect anything in return? Do you want your grandchild to return or repay the money? Or should it be considered an advance on the inheritance? If the answer to any of these questions is yes, you should make it clear to your family members in advance. It’s recommended that you prepare a promissory note or write a formal letter stating that the money given to the family member is a loan.
Consider everyone’s financial needs and status: When making gifts or giving financial favors, you should consider the financial needs of every family member. While you are at free will to give as much or as little money to anyone, you should consider the consequences of your generosity. Unequal generosity can give rise to resentment in the family.
Gifts are subjected to taxes: When giving away your money to your grandkids, you should be aware of the tax laws. While gift tax is not applicable for the first $11.18 million, if the gift exceeds $ 15,000 per annum, you are required to report it and file a gift tax return. If you make direct payments to an educational institute or medical facility, there is no reporting requirement.
Know about 529 plans: The cost of education and medical care has increasingly become expensive. Besides this, not all grandkids are of the same age group. If you have some grandchildren in their infancy and others in adulthood, you may have a hard time maintaining balanced grandparental assistance. The best way to handle such a situation is creating and funding 529 accounts for every grandchild. 529 are special accounts that are not taxed unless the fund is used for higher education and college fees. You can consult qualified probate and estate attorney or look online for best probate lawyer near me before opening such funding accounts.
Be wary of being too generous: It’s essential that you don’t overlook your own financial and personal needs and wants when making gifts to family members. Giving out a large sum of amount and money can deplete your financial resources and savings. You should also be mindful of your own long-term health needs and assisted living needs.