Leaving a legacy for future generations is an important part of many people's financial plans. While it may be part of your vision, you may be uncertain about how to accomplish that goal. The plan that is right for you will depend on a number of factors, including when you want to provide that support or how much control you might want to have over how the money is spent. Consider the following options.
Gifting to grandchildren
It can be as simple as writing a check. A straightforward financial gift is an easy way to provide for a grandchild's future right now, but this method gives you little control over how that money is spent. Keep in mind that your gift cannot exceed $15,000 per person per year (in 2021) or it will trigger gift tax implications for your estate.
Saving for college
Contributing to their education by helping pay for college is another way to support your grandchildren while you are still alive — with more control over the funds than a simple check. For example, you could consider opening a 529 College Savings Plan for each grandchild. Gift tax limits still apply — with the flexibility of rolling five years' worth of gifts ($75,000 in 2021) into a one-time contribution to a grandchild's 529 savings account.
Leave money to them in your will
A reliable way to pass money to the next generation is to name them as beneficiaries on your life insurance. Single premium life insurance policies are particularly well-suited for this purpose. These policies are fully funded up front with a lump sum payment, then have a guaranteed payout upon your death. Most insurance companies will not pay benefits to someone younger than 18; however, you could consider establishing a trust for your minor grandchildren to address this.
Establish a trust fund
You can place assets in a trust and rely on a trustee to manage those funds based on directions you provide. Opening up a trust is often useful whenever minors are involved or if adult beneficiaries have money-management issues.