Whether to help support the grandchildren now or leave them an inheritance is a question that many a baby boomer and a growing number of Gen Xers have had to answer, each in their own way.
On one hand, leaving a financial legacy can provide future security for your grandchildren. On the other hand, providing support now can create meaningful experiences and foster family bonds.
The sweet spot here is finding a balance that addresses your family dynamics and financial circumstances, including your own.
Here are some questions to ask yourself and your family, and some options to consider, as you move together through this journey called life.
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Why shouldn't I do it now?
From education expenses or down payments, to daily living or helping launch or support a family business, your gifting can have a profound effect on your grandchildren's lives and create lasting memories -- right now.
Consider investing in experiences that can create lasting memories for your grandchildren. Funding vacations, educational trips, or extracurricular activities can offer enriching experiences that may not be possible otherwise.
Even if their parents can afford it, footing the bill can be a gift to yourself when it comes to your own sense of well-being and self-worth. So can helping the generation-after-next -- your grandchildren -- get a great start on their own lives by minimizing their financial stress and maximizing their opportunities.
Assess everyone's situation, beginning with your own
Before making any decisions, evaluate your own financial stability and long-term goals, and theirs. Consider factors such as retirement savings, healthcare costs, and potential unexpected expenses. It's like the oxygen mask directions we hear from flight attendants: Put yours on first. Then you can help the child accompanying you on this trip.
But keep in mind that you don't have to be a martyr about this. Supporting family members is admirable and necessary, but it's crucial not to neglect your own financial and emotional resources and well-being. That could have negative consequences for all of you in the long run.
Communicate with family members
Needs and wants are not always the same thing, right? Talk to your children and theirs about their financial needs and aspirations. Those are tough conversations, and only you and they can determine boundaries and transparency.
But you need to find out what you can about what's really going on. That will help you understand where they're coming from, where they want to go, and what they need now. You can't do this effectively without doing the hard work of open communication -- and doing that work will help you best decide what to pay out now and what to leave for them later.
Image source: Getty Images.
How should I give?
You can give cash now for a house, to bail family out of a jam, or whatever needs you determine are worthy. You can help pay for their education now, for instance, through a 529 plan. Or consider UTMA (Uniform Transfer to Minors Act) or UGMA (Uniform Gift to Minors) custodial accounts, which let a child receive the funds and/or property with an adult supervising the account and specific rules and timelines for distribution.
Then there are trusts and wills of myriad types. For example, a living trust can be used to disburse assets now and after you're gone (at which point your heirs can appreciate not having to go through the probate process that can come with using a will and last testament).
You can do both while striking a balance
The decision between leaving an inheritance for your grandchildren and supporting your family now is a deeply personal one, influenced by individual circumstances and priorities. Finding the right balance is key, and open communication within the family can help ensure that everyone's needs and aspirations are considered.
The key is giving serious consideration to both sides -- reasons to leave an inheritance and reasons to provide support now. Focus on being purposeful with funds, having open communication, and striking the right balance.
