Financially Sound Ways to Give to Minors

There are many options for helping a child secure his or her financial future. One of the best presents you can give a grandchild is the gift of a secure future. Money you give them when they are young will grow, increase in value and be used for a variety of purposes. Going to college, buying a car or home, taking a trip around the world or starting a business are just a few. Remember, once you give a monetary gift, the money is the recipient’s to spend as they choose — although you can delay granting access until they’re an adult. If you want to help your grandchildren financially, here are some options:

Financial Security Now
Cash – You can give someone $14,000 a year without having to pay a gift tax or report the gift to the Internal Revenue Service. If you and your spouse both decide to give a cash gift, the total amount can be as high as $28,000 a year. Be aware that it’s a lot of money for someone younger than 18 to manage. One option is to put the money in a custodial account and appoint someone to manage the money. While the child’s parent may be the logical choice, that person might not be the best money manager. Also, when your grandchild is 18, they can spend the money any way they like. To make sure you are not paying more taxes than you need to on a gift, be sure to talk to a tax advisor before making any decisions.

Financial Security Later
Savings Bonds – When you purchase a savings bond as a gift, you are loaning the U.S. government money from one to 30 years. Bonds can be redeemed for face value after a year, but the longer they are held, the more interest they will earn. Savings bonds are not as popular as they once were because of poor performance due to low interest rates, but they still can be a sound financial gift. You can put the bond in your grandchild’s name; and, if your grandchild uses the money for qualified education expenses, they may be able to get some tax benefits. Savings bonds are available as Series EE or Series I bonds. Both accrue interest monthly and compound interest semiannually.

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