You’ve been hinting and asking… When are we going to get grandkids? Well, your kids finally called your bluff and a little bundle of joy is on the way.
Everyone loves grandkids. All the adorable, and at the end of the day, your kids take them home. Simple, right?
As much as we love grandkids, too many people fail to prepare for them. Let’s face it, one way or another, you’ll want to spoil them, and you want what’s best for them and for your own kids as they raise them. Proper planning and open communication are key when you’re expecting grandchildren.
Set expectations for everyone, including yourselves
Take a good hard look at your finances. Set boundaries for what you are able to help with. Do you want to set up a college fund? Spring for family vacations? Establish a trust? Those are expenses you probably weren’t accounting for.
Look at the particulars of you situation. If you live near your grandkids, budget for incidental expenses. If you are retiring, you will have more time to spend with your grandkids, and that’s going to impact your budget. There will probably be more grandkids on the way, so take that under consideration.
From there, communicate your expectations to your kids. Some parents may not feel they need extra support, or might see your financial support as intrusive. Others might be counting on their parents for things that simply aren’t in the budget. Communicating ahead of time will allow you to focus on the fun stuff.
If you are going to help with college, plan now
A 529 has a much smaller impact on financial aid packages then a direct financial support of a student. Further, having money set aside allows the money to grow to keep up with the rising costs of tuition. It can be used for any post-secondary education, so they will still get the flexibility to pursue their own career path.
Decide now if you plan to be involved with their education and again, make sure the parents are on board.
Be thoughtful about inheritance
If you don’t have a will, you certainly will need one. But if you have one, you will want to make sure your grandchildren are included. As important, make sure you update your beneficiaries. Beneficiary selection supersedes the will in terms of asset allocation.
If you have a specific interest in how inheritance funds are spent, consider a trust. This allows you to set up guidelines for how the funds are to be used. You can do a “pot trust” and simply designate a trustee to disperse the funds to your grandchildren, or you can do an individual trust for each grandchild. This is a great option if you want to make sure the funds are only available at a certain age, or only put to use for buying a house or starting a business.
Consider whether you are likely to be the primary caregiver
Per the U.S. Census, there were more than 5.7 million children raised by grandparents. There are a lot of reasons why grandparents might become primary caregivers, from health issues to family instability.
Understanding the implications ahead of time will help you understand the deductions and tax credits available to you as a primary caregiver. This might be an uncomfortable discussion to have with your children, so if you see this as a possibility, meet with your advisor to talk through the possible scenarios.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This article was originally published in the Pioneer Press. You may view the article here
