By Monet Binder, Esq.

As you’re sitting down and examining your finances, you might be thinking about not only providing for your children, but also helping your grandchildren.  With the right planning, you could ease the financial burden for your children whose hefty expenses can include those related to summer camp, Yeshiva, weddings and maybe even the cost of a down payment on a first home for their children. These gifts can be in the form of a legacy plan, after you pass on, or possibly while you are still here to enjoy seeing your grandchildren benefit from your lifetime of work.

Once you’ve made the decision to help your family, there other planning considerations you need to be aware of which can ensure your plan is easy to implement, cost-efficient, and works for your family when it’s needed. There also could be questions of fairness of distributions among your family members, legal issues involving taxes, eligibility for public benefits concerns, and decisions which need to be made regarding how your finances impact the possible need for long-term care.

Will Members Of The Family Feel They Are Being Treated Fairly? One thing we all strive to do is to maintain family harmony and avoid unnecessary tension or fighting within our families.  When you determine how much you want to leave for your grandchildren, you may find not all of them have the same financial needs, or you may feel closer to some and less to others.  Although, it’s your money and you can certainly decide how to pass it on, giving particular thought to the effect of an unequal distribution and resentment which can result, are circumstances worth considering.

Not A Concern For Most But Be Aware Of Taxable Gifts. Although, most of us don’t have to worry about taxable gifts since there’s no Federal Gift Tax imposition for the first $11.4 million (in 2019 and adjusted for inflation) you give away, any gift to an individual in excess of $15,000 (also according to the law in 2019) during a one year period, must be reported on a gift tax return. Also, keep in mind that two grandparents, together, can give up to $30,000 per recipient, each year, without a reporting requirement. And, there’s no gift limits or reporting requirements for payments made directly to medical and educational institutions for health care expenses and tuition for others.

Don’t Be Misunderstood – Do You Want To Make The Giving a “Gift”? Do you, as the grandparent, have an expectation the funds will be repaid or that the money is an advance on the grandchild’s eventual inheritance? If the answer is yes, you need to make this clear – whether you do it in a letter that goes with the check or, in the case of a loan, there should be a formal promissory note.

It’s Important To Consider Public Benefits, If Giving To A Special Needs Child. As a parent and grandparent, who cares deeply about your family, especially when they have the demands of a child with special needs, you may instinctively want to set up a fund or give gifts outright to ease the burden.  If a child is receiving public benefits, the gift could be considered income and affect what they are eligible for. Check with an attorney to make sure you don’t negatively impact the benefits they receive, when you are only trying to help.

Be Generous But Be Careful. As you plan your giving to your family, make sure to keep enough money to pay for your spouse’s and your own needs.  Smaller gifts probably won’t hurt your finances but making too many larger gifts can quickly deplete a lifetime of building your assets.  It won’t be good for you or your family if you find yourself with less that the resources you need to live the life you envision for yourself, in your later years.

Figure In The Possibility Of The Need For Long-Term Care. When thinking about how much is enough, in making sure you have enough savings/assets available, you need to consider the possibility of needing care, whether with an aide in your home, or in assisted living residence, or in a nursing home. Records show that 70% of seniors, at one time or another, will need some form of long-term care.  The cost of long-term care can be astronomical. Having to pay for long term care can deplete those assets you were hoping to leave as a legacy to your family.  Seniors who cannot afford to pay for high costs of long-term care from their own funds, but want to provide financially for their family members, need to be aware that any gift can make them ineligible for Medicaid benefits for the following five years (which is part of the complex subject of Medicaid planning), and needs to be discussed with a knowledgeable elder law attorney.

Other issues to consider that may involve grandchildren who shouldn’t receive gifts directly because they may not be responsible or will use them for addictions they may be struggling with. Or, the gifts may undermine the parents’ plans for the grandchild or their authority. In some instances, grandparents may want to consider “incentive” Trusts, which provide that the funds will be distributed when grandchildren reach certain milestones, such as when they get married, graduation from college, or holding down a job for a period of time. Communication with the middle generation can be key to making certain that gifts achieve the best results for all concerned.

MONET BINDER, ESQ., is an attorney in practice over 20 years, with locations in Brooklyn and Queens, dedicated to protecting families, their legacies and values. All halachic documents are approved by the BAIS HAVAAD HALACHA CENTER in Lakewood, under the direction of Rabbi Dovid Grossman and the guidance of Harav Shmuel Kaminetsky, shlita, as well as other leading halachic authorities. She can be reached at 718.514.7575 or email at [email protected]. Her website is www.mbinderlaw.com.

The information in this article is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.