This Day On The Street
Continue to site
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

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.

Must Read: Home Data Point to Upswing -- in 2014

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs