This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How to Be a Good Grandparent

By Lewis J. Walker

NEW YORK (AdviceIQ) -- The excitement in the client's voice was palpable. He and his wife were to become grandparents for the first time. Their next step was to plan for funding the grandchilds education and bequeathing the youngster assets later on. How do they do that?

Lois Wyse, author of Funny, You Don't Look Like a Grandmother, observed, Grandchildren are the dots that connect the lines from generation to generation. There is a somewhat indescribable satisfaction in seeing a son or daughter grow up and extend the lineage chain, the next chapter in the family history.

As financial advisers, after we get the joyous news, the next question often involves establishing college savings accounts. The most popular vehicle is a 529 college savings plan, offered by all 50 states. You may select one from your own state (there may be some tax advantages) or you can buy one from another state if you like that plan's investment options better.

Money placed in a 529 plan is a gift made with after-tax money. The advantage is that the money grows free of income tax if used for qualified education expenses. Every person may gift up to $14,000 this year on behalf of a child. Couples may make joint gifts of up to $28,000. Wealthy grandparents, who may be trying to move money out of a taxable estate, may make five years of gifts upfront -- $70,000 per person per child, or $140,000 jointly. Grandparents may control the account if they wish, but in the event of their death before the account is used, ownership may pass to the mom or dad.

Another, but limited option, is a Coverdell Education Savings Account. Similar to a 529 Plan, ESAs are a potentially tax-free way to save for college. But unlike a 529 plan, which is restricted to higher education, you also may use an ESA for qualifying K-12 education. If you think private K-12 education is in the cards, an ESA may be an option.

One limit is that you may contribute only $2,000 a year to a child's account from all sources. Also, in most cases, only the parents can control a ESA, not the grandparents. If that's OK, you could gift a son or daughter the money and the parent could fund the ESA for their kids.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs