[Ian Patrick is not only a financial advisor and Certified Financial Planner® with Merrill Lynch, but also a friend who has donated his expertise to help me with a variety of philanthropic projects over the years. He is now helping again by writing the following article that provides basic information on how we autism grandparents can provide long-term financial support for our grandchildren. – John Bryan, Coordinator, Autism Grandparents Club]
If you are a grandparent of an autistic child, you may be wondering how you can help provide for your grandchild financially over the long term. There are many approaches you can take to address this need, each offering you a different level of control of the funds and varying tax implications for you and your beneficiaries. Keep in mind that some decisions may be irreversible, so it’s important to seek legal advice, tax advice, and talk to a financial professional (preferably one who holds a Certified Financial Planner (CFP®) designation) to understand the pros and cons before you take action. Below are some broad ideas to get you started.
Assuming the grandchild is a minor, you can establish a joint bank or investment account with them or open a custodial account for their benefit and gift up to $15,000 in 2020 without triggering the gift tax. If you open a custodial account, make sure to set up a successor custodian in case something happens to you. As an alternative, you can gift money to the child’s parents, but by doing so you will give up control of how the funds are spent. Even if you gift money directly to a minor, his or her parent would control the use of the child’s money until they reach age of majority (this varies by state). Since your grandchild has special needs, the parent may control these assets even beyond this age if the recipient is not capable of managing their own affairs and has a conservator.
Another simple way to gift assets to your grandchildren is through your will. This will be subject to estate tax rules, and most people will be able to make this gift tax-free. However there still remains a question regarding who is going to manage the money and how it is spent.
A trust is a different method that can give you control over how and when the money is used, even after you die. There are many types of trusts and a “special needs trust” is a popular route for many people. By using a trust, you can control the money as long as you are able and then assign a person or institution (like a bank or trust company) to manage the funds based on the directions you make when you set up the trust. This is a great way for you to control how your gift is spent over your grandchild’s life, long after you are no longer here to oversee it yourself. Trusts can be funded gradually over time or as a lump sum, and the money in the trust can be invested in securities or used to purchase insurance (for example, to provide money when you or their parents die).
In addition to financial assets, you may wish to give your grandchild (directly or via a trust) a home to live in, furniture and other things to make their lives easier. As with financial assets, it will be important to think about how the property will be maintained, and by whom, and how the cost will be managed over your grandchild’s lifetime. It’s a lot to consider and every situation is as unique as your grandson or granddaughter.
[The final sentence is key: “. . . every situation is as unique as your grandson or granddaughter.” We autism grandparents will want personal financial advisors who are trained to understand and evaluate our unique situations and then suggest appropriate financial planning options. – John Bryan]