Grand Children –How to leave money to them?
What’s the best way to leave money for your grand children. We have a trust for our children but no way of leaving money for the grand kids. I do have 6 grand children. I have one IRA that for them, however I’ve heard that’s not a good way to leave them money. Help.
Terry Says
Do NOT leave money in an IRA for your grandchildren. They are minors and cannot be beneficiaries. You should open a 529 college savings plan for each grandchild, getting started now with a small amount of money in each. OR open one for each “family” — assuming that not all have the same parents. Children in the same family can share the assets in their college savings plan. And the money grows tax-free inside the plan.
You can easily do that at your state’s plan — or go to www.SavingforCollege.com to see how your state plan is rated and get linked to it. If in doubt about your own state’s plan (you might get a tax deduction on state taxes for contributions) then just use the Vanguard plan, which is low -cost and easy to open. There is no residency requirement to open a 529 plan, and it can be used for any college in any state, regardless of where the child’s parents live when the time comes for college.
I recognize that you don’t want to distribute all the money right now. After all, you might need it. But when you make your estate plan, you can designate that a percentage of your estate (not specific dollar amount) be distributed to each college savings plan — along with any other bequests to your adult children. You’ll need a good estate planning attorney to make this work properly.
And if the grandchildren are already out of college when you pass on, this money will give them a head start for their own children’s college education.
