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How to Give Gifts to Your Grandchildren

  • October 25th, 2023

Grandfather and grandson giving a high five with a gift in their handsGifting assets to your grandchildren can help them get a good start in life — it can also reduce the size of your estate and the tax that will be due upon your death. You can accomplish this in different ways.

Outright Gifting

Perhaps the simplest approach to gifting is to give the grandchild an outright gift. You may give each grandchild up to $17,000 a year (in 2023) without having to report the gifts. If you're married, both you and your spouse can make such gifts. For example, a married couple with four grandchildren may give away up to $136,000 a year with no gift tax implications. In addition, the gifts will not count as taxable income to your grandchildren (although the earnings on the gifts, if they are invested, will be taxed). Just remember that any gift can interfere with Medicaid eligibility.

Protecting Your Gifts

But you may have some misgivings about making outright gifts to your grandchildren. There is no guarantee that the money will be used in the way you may have wished. Money that you hoped would be saved for educational expenses may instead be spent on a fact-finding mission to Fort Lauderdale. Fortunately, there are a number of options to protect against misuse of the funds:

  • You can pay for educational and medical costs for your grandchildren. There's no limit on these gifts, meaning that you can pay these expenses in addition to making annual $17,000 (in 2023) gifts. But you have to be sure to pay the school or medical provider directly.
  • You can make gifts to a custodial account that parents can establish for a minor child. 
  • You can transfer money into a trust established to benefit a grandchild. 
  • You can reduce your taxable estate while earmarking funds for the higher education of a grandchild through the use of a 529 account. 
  • You can use other gift vehicles like IRAs and savings bonds. 

To determine the best way to provide for your grandchildren, contact your attorney or find an attorney near you. 

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Created date: 12/20/2012
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