2nd Quarter 2024

They say something magical happens when a parent turns into a grandparent. Of course there’s the unconditional love and admiration for this child of your child; and there’s also the urge to shower them with toys, clothes, presents, money and other gifts!

Many people don’t want to wait until they are gone to give gifts to their grandchildren, and they think, ‘I want to spoil them while I’m still here!’ But that’s not always a good plan for the grandparent. Many state and federal programs – including Medicaid and Veteran’s Administration benefits – are needs-based programs, wherein making gifts could disqualify you from those programs. So what are some options to consider when giving money to grandchildren, nieces and nephews, or other intended beneficiaries?

College Savings Programs

 

These programs, more commonly known as “529 plans”, are state-sponsored programs, authorized by the U.S. tax code. These allow grandparents (or parents, or anyone who wants to create one) to set aside money for their grandchild, specifically for higher education expenses later. These are great for a few reasons: they allow control over what the money is spent on, rather than writing the grandchild a blank check to spend on whatever they want; there are tax advantages for the account creators (grandparents); and some plans allow you to pay for tuition credits now, while tuition is presumably lower than what it may be in the future! There are a few downsides, however: limited ability to withdraw money from these accounts without penalty; not all states and not all schools participate; and these are still considered assets in the grandparents’ names if they later try to apply for Medicaid or other needs-based programs.

 

Smaller Gifts

 

Grandparents can still make typical gifts to their grandchildren, especially at gift-giving holidays and birthdays. However, this is not the time for a large gift. Depending on the state’s rules and how they apply them, gifts can be counted against you for Medicaid and VA purposes. As long as you stick to smaller amounts, you are less likely to be penalized for those gifts. And don’t make them a routine, either! Medicaid can total those gifts and penalize you for them.

 

Trusts

 

Utilizing trust planning for gifts to grandchildren is often the best route, unless delaying the gift until the grandparent’s death is not desirable. By setting up a trust during life, the grandparent can retain control over the assets, and, depending on the type of Trust, it may not count against them for Medicaid or other needs-based programs. When the grandparent passes away, the money can be left to grandchildren in trusts, where it is protected and managed for them, by someone the grandparent appointed during their lifetime. This allows for flexibility for the grandchild, while receiving the benefit of asset protection.

These are not all your gifting options, but just some things to consider the next time you want to spoil your beloved grandchildren.

 

In recent years, these arrangements have made headlines with high-profile cases that have sparked debates about the balance between personal freedom and the need to safeguard those who are incapable of managing their finances, health, or other legal decisions.

In estate planning, we always hope clients do their planning early, when everyone involved can execute their documents and make their wishes known. But when that doesn’t happen, we have to be able to protect the wishes and well-being of the incapacitated person. This is why a Court will appoint someone to be a conservator of that person to make whatever decisions they need help making.

Recently, notable comedian and former talk show host, Jay Leno, filed for a conservatorship over his wife, Mavis Leno, who is living with dementia. The purpose of the conservatorship is to execute an estate plan for Mavis, that Jay Leno believes his wife would have executed if she were able. The Lenos have been married for 43 years.

In order to be a conservator for someone, you must petition a court asking for the right to be the conservator of an incapacitated person. An investigation and hearing are held and the Court decides whether to grant the conservatorship. Even if you are appointed, there are individuals who will check in to make sure you are doing everything you are supposed to for the person you are taking care of.

While conservatorships are intended to help the incapacitated individual, they raise questions about individual autonomy, and the freedom for people to make their own life decisions (even if they’re not the best decisions for them).

There are different kinds of conservatorships, and the definition varies across different states. There is financial conservatorship, dealing with the person’s finances and legal decisions, and there are personal conservatorships which may cover medical decisions, housing, education, transportation and other activities of daily life. The conservatorship may also be general or limited in nature, and may go on for a long time, or just be temporary while someone is recovering.

Keep in mind, conservatorship is different from guardianship and adult adoptions, and also different from special needs trusts, powers of attorney, medical health directives, and living wills! While some of these other concepts overlap with conservatorships, they are not the same thing. Make sure you check with an attorney before proceeding with any of the above legal avenues, to make sure all of your goals are being met!