Investing & Saving for Grandchildren

A new grandbaby in the family can provide all sorts of excitement and
gift-giving opportunities. Beyond the cute clothes, toys and functional necessities, one of the most lasting and important gifts you can give is the foundation for a solid financial future for your new family member.

  • Investments for
    Grandchildren
  • Giving your grandchild
    a financial head-start
  • Providing for your
    special needs grandchild

Investments for Grandchildren

An education fund can have a lasting impact on the lives of your grandchildren, because it can help them find and establish themselves in a profession they love. Talk to your Financial Advisor today and learn how you can help make investments for your grandchildren.

  • Establishing a 529 plan. 529 plans are designed specifically to help people establish college savings for children. The benefits of 529 plans include tax-deferred accumulation and federally tax-exempt withdrawals when the money is used for qualified college education expenses. In addition, gifts to a 529 plan remove those assets from your taxable estate.

    The availability of such tax or other benefits may be conditioned on meeting certain requirements.

    Please note: All gifts are subject to the annual gift tax exclusion amount, which is $13,000 for 2012 -- including those to trusts, custodial accounts, 529 plans, etc. Contact your tax advisor for more specific information.
     
  • Pay your grandchild's tuition directly. You also can pay your grandchild's education expenses directly to a primary, secondary or post-secondary educational institution. Payments made directly to the institution are not considered gifts for gift tax purposes; therefore, they do not use up your annual gift tax exclusion amount. And of course, those funds are removed from your taxable estate.

No other gifts may be made to the beneficiary for a five-year period. A portion of the contribution may be subject to recapture if the donor dies within those five years.

Please consider the investment objectives, risk, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.

Learn more about education funding.

Giving Your Grandchild a Financial Head-Start

There are many ways you can lay the foundation for your grandchild's future, some of which may also benefit your estate if estate taxes are a concern.

  • Establishing a trust. Setting aside money in a trust for your grandchild can let you set the standards for how that money is used, whether by the trustee, the parents or the child when he or she is eligible for distributions. An irrevocable trust removes the amount you put in the trust from your estate.
  • Gifting investments. By setting up a custodial account, your grandchild can have an established investment portfolio when he or she becomes an adult. This can also give you an opportunity to teach your grandchild about investing as the two of you track the movements of the portfolio. Keep in mind that gifts to a custodial account are irrevocable. The custodian controls the assets and makes decisions about distributions.

Learn more about estate planning and trusts.

Note: Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors. Wells Fargo Advisors and its affiliates do not provide legal or tax advice. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.

Providing for Your Special Needs Grandchild

If a grandchild is disabled or has special needs that are accompanied by extraordinary expenses, providing for them can be very complex. Every situation is different so it's important to work with your family attorney and other professionals to create an appropriate plan.

Government benefits and programs. In some cases, the family may decide that it's critical to maintain a child's eligibility for government benefits and programs. In those cases, it may be appropriate to avoid certain types of gifts that could cause a child to lose eligibility. There are a variety of federal and state assistance programs, and each one has differing eligibility criteria.

Special needs trust. A "special needs trust" allows family members to provide financially for a special needs child without harming his or her eligibility for those government benefits and programs. At the same time, a special needs trust may be subject to restrictions on how (or how much) money is used, so it does not fit in every case. In some situations, a grandchild may need help with a disability but can live a full and independent life without any need for governmental assistance; if so, a more flexible trust can be used or you may even be able to provide direct financial assistance.

In developing a plan, it's a good idea to seek advice from a variety of knowledgeable specialists. This group could include an attorney, physicians, social workers and counselors, and nonprofit organizations who have experience in dealing with a particular type of disability or medical condition.

A financial advisor can work closely with you, your attorney and other professional advisors to help you implement strategies for providing for a special needs child.

Note: Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors. Wells Fargo Advisors and its affiliates do not provide legal or tax advice. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.


 

We're With You Every Step of the Way

Your situation changes over time. So do your needs and goals. That's why our financial advisors will be there to provide you ongoing guidance -- along with the exceptional service you deserve. That's what it means to be with Wells Fargo Advisors.

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