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Financial Guide for First-Time Grandparents

Having a strategy for incorporating your new grandchild’s future into your overall financial picture can make a big difference. Here is a guide to help you get started.

Menashe Morley Group
Image Credits Photo by Zach Tanz

Becoming a grandparent changes everything — including, often, your approach to your finances. Having a strategy for incorporating your new grandchild’s future into your overall financial picture can make a big difference. Here is a guide to help you get started.

Giving the gift of education.

A single year’s tuition at a public institution is expected to rise above $44,000 by 2030, and twice that much at private schools, according to the U.S. Department of Education. Given this, the earlier you start a college savings program, such as a Section 529 college savings plan for your grandchild, the more impact your gift is likely to have. With a 529 plan, money you set aside has the potential to grow tax-free until it is needed, and there is no tax when the money is spent on qualified higher education expenses. If you start a 529 now and let it build for 18 years, the tax savings could be significant.

Creating a trust.

Another way to set aside a specified amount of money for a child’s future is to establish a Uniform Gift or Transfer to Minors Act (UGMA/UTMA) account. In a typical arrangement, grandparents put money into a UGMA/UTMA account that can be used only for the benefit of the youngster. Either you or the child’s parents are listed as custodian, and the custodian can make spending decisions for the child until he or she reaches the age of majority in his/her state of residence.

The primary drawback to a UGMA/UTMA is that once your grandchild comes of age, he or she is free to spend the assets at will. To exercise more control over when the money is used, some state laws may allow you to extend the age at which your grandchild gains control of the assets.

Reviewing your will.

Make sure your will reflects that your new beneficiary. In your current will, you may have stipulated that the inheritance will go to your daughter and her husband, on the assumption that it will also be used to care for any grandchildren. But what if family circumstances change — your daughter dies and her husband remarries, for example? To make sure that your grandchild receives the inheritance you want to leave, you might establish a trust for the grandchild and indicate which assets you would like placed in the trust after your death.

Discuss these and other strategies with your financial advisor soon after the birth of your first grandchild and remember, your first grandchild may not be your last.

For more information, contact The Menashe Morley Group in the Rancho Santa Fe office 858-381-8113. The Menashe Morley Group, serving the community for over 34 years: David Menashe is a Senior Vice President and Wealth Management Advisor, Bruce Morley CRPC ® is a First Vice President and Wealth Management Advisor, John Naviaux CPWA ® is a Vice President and Wealth Management Advisor, and Jesse Menashe is a Financial Advisor. Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation. Before you invest in a 529 college savings plan, request the plan’s official statement from your Merrill Lynch financial advisor and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the plan, which you should carefully consider before investing. You should also consider whether your home state or your designated beneficiary’s home state offers any state tax or other benefits that are available only for investments in such state’s 529 plan. Section 529 plans are not guaranteed by any state or federal agency. Investment products: Are Not FDIC Insured, Are Not Bank Guaranteed, and May Lose Value. MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation. Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. © 2017 Bank of America Corporation. All rights reserved. AR9RF9NB

Menashe Morley Group
Menashe Morley Group


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