The best ways to share wealth with family

It’s always a joy to watch grandchildren unwrap gifts of toys and electronics, but the moment created is fleeting. To extend the joy, consider instead gifts that can create a lasting impact on your grandchildren’s lives.

The key to giving a substantial gift is to first have a well-thought-out financial plan. Ensure first that you are able to cover the expense of the gift before considering. For financial gifts especially, it is worthwhile to incorporate gifting as part of your financial planning. Once you have worked with your wealth planner to ensure coverage of your own needs, it may then be appropriate to consider gifting.

Gifting Strategies

Cash Gifts

As a wealth planner, I have seen significant changes in how older generations are gifting over the past few years. Instead of passing assets to children and grandchildren in the form of an inheritance, many older family members are giving cash gifts during their life so they can see the impact they have on their loved ones.

Cash gifts allow the recipient to spend the funds on any item or experience they want – which can be both good and bad. Small gifts of cash may do no harm, but what if the gift is a more sizable amount? And what if it doesn’t come with any financial advice? As the giver, you have the opportunity to provide guidance on the intended use. It may be simple advice, such as “Make sure you save this” or, especially with larger gifts, it can be more detailed, giving direction on what to use for and who to contact for deeper advice, such as your own financial planner. Providing that needed guidance may give the recipient a head start on becoming self-sufficient and making decisions that can potentially impact their future.

Motivational Reward

A recent shift in giving has been to use the gift as a motivator. For example, upon the completion of a successful college education, grandparents may help provide a down payment for the purchase of their grandchild’s first house. Upon a predetermined accomplishment, the grandchild is rewarded with a gift that positively impacts their lifestyle and future. Other motivators include paying for college if certain grades are maintained, providing funding to help start a business, or rewarding hard work by contributing directly to the recipient’s IRA, earmarking assets for the recipient’s retirement.

Experiences

Gift giving has also shifted toward enhancing experiences for the family. Providing the opportunity for the family to spend time together is often coveted as our daily lives become busier. Having that once-in-a-lifetime vacation or a trip to celebrate a special anniversary or birthday can provide memories that no cash gift can match. Through these experiences, communication can often be enhanced and the family’s core values can be shared and reinforced. Some families use a trip to the family’s vacation home, or a retreat to get away. In any form, a special family get together can help create memories that nothing material can match.

Charitable

Creating a charitable giving vehicle has become much more simplified and streamlined over the last decade, and many are using this giving technique to enhance family harmony and share values. One way this can be accomplished is by family members making an irrevocable tax-deductible contribution of cash, securities or other assets to a donor advised fund.

The family advises the program sponsor of the fund how they would like their contributions invested. The family can make recommendations for grants to other nonprofit organization (virtually any qualified 501(c)(3) public charity). Families generally meet numerous times during the year to discuss their charitable passions and choices for grants. These meetings often encompass many generations, including young school-age children. We’ve found these experiences often provide the younger generations with their first experiences of charitable giving, while creating memories and a solid foundation to help them continue to carry out the family legacy.

In summary, there is a traditional saying, “It’s the thought, not the gift, that counts.” Grandparents can offer both for their families through purposeful gifting.

Amy M. Kane is Senior Wealth Planner for the Private Client Reserve of U.S. Bank.

Disclosure: This information represents the opinion of Amy M. Kane, Senior Wealth Planner, The Private Client Reserve of U.S. Bank. U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.