Dollars and Sense

Before giving to your grandchildren, consider these tips

Providing financial support for grandchildren can be a wonderful gesture, but it should be managed within the context of an overall financial plan. If you’re contemplating passing down wealth to your grandchildren, consider these tips for doing it in a way that’s beneficial for both them and your finances.

1. Give only what you can afford. Your own financial security should be your first priority. Since there is no way to know with any certainty how long you’ll live, how the market will perform or how inflation may impact your purchasing power in retirement, make sure that you gift within your means.

2. Clarify whether you’re making a loan or giving a gift. If you’re giving a gift, familiarize yourself with federal tax rules, which are based on the calendar year. For example, in 2017 you can give up to $15,000 to each of your grandchildren before the federal gift tax is applied. Be sure the recipient knows it’s a gift to alleviate any uncertainty about whether they’re required to pay you back.

If you are loaning money to a grandchild, be specific about the terms of repayment. This will help safeguard your financial situation and ensure both of you are on the same page—now and in the future.

3. Discuss your intentions. If you would like to help your grandchildren pay for college or make a down payment on a home, be sure to communicate this with their parents. Be upfront about the amount you’d like to contribute and keep the conversation open in the event that future situations impact the dollars you’re able to give.

4. Set appropriate boundaries. Even if you want to help your grandchildren financially, it may not be appropriate to do so. The experience of letting them live within their own means can be an excellent teaching opportunity. Keep in mind the smart—and sometimes tough—financial lessons you learned as you made your own way as a young adult and the pride that came with successfully overcoming challenges.

5. Incorporate giving into your overall financial plan. Your financial priorities are likely to change, especially as you near or move through retirement. Evaluating your giving goals against your other priorities will give you a clear and realistic understanding of how much you can comfortably give as well as the most tax-efficient and effective way to go about it.

Derrick Kinney is a Private Wealth Advisor with Ameriprise Financial Services, Inc. in Arlington, Texas. He specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years. To contact him, call 817-419-6001. Primary office is located at 700 Highlander Blvd, Suite 335 in Arlington, Texas or visit