Tax Advantaged things grandparents can do for grandchildren

[Anonymous]

So much misinformation in this thread.

Payments made to schools are not gifts — but daycare and summer camp are not schools.

Yes you can advance fund a 529 with 5 years contributions but then you cannot give further gifts to that person for 5 years without filing a gift tax return.

Really though if your parents are well off and looking to help you don’t need to worry about any of this. If your parents are paying for college it doesn’t really matter if they cash flow it or use a 529.

[Anonymous]

Anonymous wrote:So much misinformation in this thread.

Payments made to schools are not gifts — but daycare and summer camp are not schools.

Yes you can advance fund a 529 with 5 years contributions but then you cannot give further gifts to that person for 5 years without filing a gift tax return.

Really though if your parents are well off and looking to help you don’t need to worry about any of this. If your parents are paying for college it doesn’t really matter if they cash flow it or use a 529.

If it's in a 529 it's safe from estate taxes should OP's parents die before her child goes to college.

[Anonymous]

If a grandparent directly pays for a product or service for the benefit of a grandchild it is not subject to gift tax or counted against the lifetime gift tax exclusion.

If you aren’t clear on this, ask a tax accountant before you give, not internet random people

[Anonymous]

Education!!!

Start a 529 and have the grandparents fund it now. Each grandparent can gift each kid $18K/year. So your parents can put $36K/year into a 529 for each kid (if you have future kids). Look into it, you can also superfund a 529 with 5 years worth of gifting immediately.
Reason for 529---it grows tax free. Over 18+ years that is a huge advantage.

They can also pay for private school directly and I believe it doesn't count as a "gift".

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm lucky in that my parents are well off. I'm not sure how much money they have but I know they have planned for paying the estate tax so it's above that amount. I just had a child, my parents' first and possibly only grandchild, and my father would like to discuss what he can do for his grandchild financially. I'm sure he already has a plan, but before we talk I'd like to have some idea of options. It's just hard for me to research right now because I'm very sleep deprived with a newborn! He gives my siblings and me the annual gift tax exclusion amount in a trust so I assume my child would get that as well. I also know grandparents can my for their grandchildren's school directly and not have to worry about estate tax. What about daycare? Anything else? I've also received quite a few checks from family for my child and I need to figure out what sort of account to set up for her to deposit them. Please help out a sleep deprived new mother! TIA.

start funding their ROTH ira early

you cannot fund a Roth IRA until the kid has earned W2 income (or declared income)
But that is a good thing to do once they have a job. Gift them $$ to fully fund their Roth and 401K (once in a job with 401K)

[Anonymous]

Anonymous wrote:

Anonymous wrote:they can open a 529 for college savings (this is separate from your 529)

Totally this. You can use it to pay for school at any level now, I am pretty sure.

Check, but I think you can only use $10K max for K-12 education.

"Payments made directly from a person to an educational institution that are used for tuition, not room and board, just tuition, those payments are not deemed a taxable gift. Sometimes these are called 2503(e) gifts." (from googling) So beyond the 529 $10K, your parents can pay directly for tuition for K-12 and it's not a gift

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here. My understanding is that grandparents paying for daycare is not tax advantaged in the same way that paying directly for pre K and up is unless it’s part of the $32,000 they can gift her generally. Am I wrong on that? She’d be starting at 1 year old due to maternity and paternity leave. Thanks for the great ideas, I didn’t even think of summer camp!

The $34k (per couple to a single person) gift "limit" is just the maximum amount you can give without reporting it. You can give someone over that amount in a year, you just have to report it and start tracking to ensure it doesn't go above the total lifetime exclusion ($13 million right now). So even if a certain payment/tuition counts as a gift, they can give large amounts and not be taxed. They just have to start reporting it.

https://www.nerdwallet.com/article/taxes/gift-tax-rate

Grandparents that have enough to fully fund the gk education may likely be concerned about their lifetime gift tax exemptions. Goal typically is to find ways to use the money now that does NOT count agains that lifetime exemption.

[Anonymous]

Anonymous wrote:The limit for exempted gifts is $36k this year (from both grandparents to grandchild). You also didn't mention if your parents gift to your spouse as well as you (you just mentioned your trust). Assuming they don't already gift to your husband, they could do 5 years' worth of gifting to your spouse, $160k, and that money could go into the 529 on day 1. Then, they can still gift $36k per year for daycare until the child goes to PreK, and then beyond that keep gifting the child the max for a brokerage or savings account or to cover expenses, etc. Then they could just keep doing this in addition to paying for school once PreK starts. In 5 years, they can superfund the 529 w/ a second gift to your husband too.

Technically, they can gift the daughter, the Son-In-Law (spouse) and their Grandkid each $36K/year. So they can gift $108K per year to the family without issues. And then utilize the paying tuition for private school directly once kid hits K+ and it doesn't count against the $36K.

It's a great way to reduce estate taxes in the future, if you are HNW/UHNW

[Anonymous]

Anonymous wrote:

Anonymous wrote:Your kids are set for life with no tax planning at all. Unclench and try contributing to society.

Envy is unbecoming. If you can’t contribute, you can keep scrolling. (Not OP.)

+1000 Also Not OP

[Anonymous]

Anonymous wrote:Seems like they have quite a lot of money. There is no reason to complicate you all's life opening new accounts. If any, learn how they got it and simply continue to invest/preserve the money.
They can continue to give money away to you and siblings and you all will do great.
Zero reason for 529. It's for the company holding it to make money.

Tax advantages. That money can grow tax free until you use it. That's 18+ years. They can continue adding to the 529 yearly, even more than needed, and let it be used for med school/law school/the grandkids own kids 36+ years from now. All while it grows tax free.
Now there are Aggregate contribution limits for 529 plans in each state (this ranges from 235k to 550k---note this is not the balance, but the Contributions over time). But that is easily solved by opening a 2nd 529 in a different state plan.
There are plenty of good plans with low fees that have good investment options. Select your own funds, don't do a "my kid will graduate HS in 20XY" plan. Keep the choices aggressive until they are 14/15.

[Anonymous]

Anonymous wrote:Love how OP is sleep deprived with a newbor …but I guess awake enough to ask how much money they can bleed from their parents.

Jeeezzz, she has a trust. Her parents plan to give her the money, she just is trying to figure out the best ways to do it for a kid. As posters have mentioned, there are many ways to pay direct for things and it's not considered a "Gift". hNW/UHNW families work hard to ensure they gift as much as possible while they are alive to reduce their estate tax amounts.
They also often smartly realize that the money has much more impact when kid/family is young than once the kid is 50 and grandkids are 20.

[Anonymous]

Anonymous wrote:So much misinformation in this thread.

Payments made to schools are not gifts — but daycare and summer camp are not schools.

Yes you can advance fund a 529 with 5 years contributions but then you cannot give further gifts to that person for 5 years without filing a gift tax return.

Really though if your parents are well off and looking to help you don’t need to worry about any of this. If your parents are paying for college it doesn’t really matter if they cash flow it or use a 529.

Technically it "doesn't matter". But most rich people are looking for ways to minimize tax payments. So a 529 does just that. tax free growth for 18+ years. Why not take advantage of everything offered to everyone?

[Anonymous]

Yearly gift checks for all of you, paying for school, my in laws bought our house outright. I know you said you aren’t sure how much they have but if you’re talking in the tens and tens of millions, they really should start funding things regularly. Assuming they have a team overseeing their estate, there are many ways to help you both in the present and into the future.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Love how OP is sleep deprived with a newbor …but I guess awake enough to ask how much money they can bleed from their parents.

Jeeezzz, she has a trust. Her parents plan to give her the money, she just is trying to figure out the best ways to do it for a kid. As posters have mentioned, there are many ways to pay direct for things and it's not considered a "Gift". hNW/UHNW families work hard to ensure they gift as much as possible while they are alive to reduce their estate tax amounts.
They also often smartly realize that the money has much more impact when kid/family is young than once the kid is 50 and grandkids are 20.

But you see how it sounds like someone is trying to get their greasy grubs on their IL's money, and coming here for suggestions?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Love how OP is sleep deprived with a newbor …but I guess awake enough to ask how much money they can bleed from their parents.

Jeeezzz, she has a trust. Her parents plan to give her the money, she just is trying to figure out the best ways to do it for a kid. As posters have mentioned, there are many ways to pay direct for things and it's not considered a "Gift". hNW/UHNW families work hard to ensure they gift as much as possible while they are alive to reduce their estate tax amounts.
They also often smartly realize that the money has much more impact when kid/family is young than once the kid is 50 and grandkids are 20.

She said she was so sleep deprived at just having a newborn…normal people focus on their new kid, they don’t immediately come to DCUM to ask the best way to milk their parents.

Maybe give it 6 months?