Welcoming a Grandchild? Here’s How to Prepare Financially and Thoughtfully
Welcoming a Grandchild? Here’s How to Prepare Financially and Thoughtfully
The arrival of a grandchild is a moment of joy, reflection, and renewed purpose. It’s also a meaningful opportunity to revisit your financial strategy — not just for your own peace of mind, but to support your children and help secure the future of the next generation.
Whether you’re a first-time grandparent or adding to a growing family, this is a natural time to align your estate, gifting, and legacy planning with your evolving family structure. Below are key considerations to guide your planning — inspired by insights from the American Funds “New Grandparent Essentials” guide, a resource we recommend for further reading.
1. Revisit and Refine Your Estate Plan
A new grandchild is a meaningful reason to review your estate documents. Key areas to address include:
- Wills and Trusts: Ensure your documents reflect your current wishes, including provisions for grandchildren.
- Powers of Attorney & Health Care Directives: Confirm these are up to date and aligned with your broader estate strategy.
- Beneficiary Designations: Review retirement accounts, insurance policies, and other assets with named beneficiaries — these override your will and should be revisited regularly.
Encourage your children to review their own estate plans and life insurance coverage, especially if they are new parents.
2. Clarify Your Role in Family Planning
You may be asked to serve as a guardian, executor, or trustee. These roles carry fiduciary responsibility and should be considered carefully. Open conversations with your children about their intentions can help ensure alignment and avoid future misunderstandings.
If you are willing to serve in one or more of these roles, it’s important to understand the expectations and legal implications — and to document your preferences accordingly.
3. Plan for Grandchildren with Special Needs
If your grandchild has or may develop special needs, early planning can make a significant difference. Two key options to consider:
- Special Needs Trust (SNT): Allows you to set aside funds for a child with disabilities without affecting their eligibility for public benefits.
- ABLE Accounts: Tax-advantaged savings accounts for individuals with disabilities, designed to cover qualified expenses while preserving access to government programs.
Special needs planning is technical and varies by state. It’s best to consult with your advisor and a qualified attorney to determine the right approach for your family.
4. Invest in Education Early
Education is one of the most impactful areas where grandparents often choose to contribute. Consider:
- 529 College Savings Plans: These tax-advantaged accounts can be used for K–12 tuition and higher education expenses. Contributions grow tax-deferred and withdrawals for qualified expenses are tax-free.
- Direct Tuition Payments: Paying tuition directly to a college or university allows you to avoid gift tax and reduce your taxable estate. Note: This strategy applies only to post-secondary education. Payments for K–12 tuition do count as gifts and are subject to annual gift tax limits.
Your advisor can help you evaluate which approach best fits your goals and your grandchild’s educational path.
5. Support Health and Living Expenses
You may wish to assist with health-related costs such as insurance premiums, therapy, or medical bills. When paid directly to the provider, these expenses are not considered taxable gifts.
Additionally, annual cash gifts (up to $19,000 per recipient, or $38,000 for couples in 2025) can help with everyday expenses while reducing your taxable estate. These gifts can be made outright or through custodial accounts, depending on your preferences and the age of the recipient.
6. Consider Irrevocable Gift Trusts
If you’re looking to make a more substantial and lasting impact, irrevocable gift trusts offer a flexible and strategic way to:
- Provide long-term financial support to grandchildren
- Protect assets from creditors
- Potentially reduce estate tax exposure
- Extend your legacy across multiple generations
These trusts can be tailored to reflect your values, timing preferences, and desired level of control over distributions.
7. Coordinate a Multigenerational Wealth Strategy
As your family grows, so does the importance of holistic planning. Consider hosting a family wealth briefing — a structured conversation facilitated by your advisor to discuss:
- Financial education and stewardship
- Family mission and values
- Roles and expectations
- Past and future gifting strategies
These conversations promote transparency, strengthen family governance, and ensure your legacy is carried forward with intention.
Further Reading
For a deeper dive into these topics, we recommend reviewing the full guide:
📘New Grandparent Essentials by American Funds — a thoughtful resource covering estate planning, education funding, guardianship roles, special needs planning, and more.
📚 The guide also includes a curated list of book recommendations for grandparents
Let’s Build Your Grandparent Strategy
As your family evolves, so should your financial strategy. Our team is here to help you align your estate, gifting, and legacy planning with your values and long-term goals.
📍 Schedule a consultation today to explore how we can support your multigenerational planning.