Smart Gifting: A Santa Barbara Estate Lawyer’s Guide to Supporting Your Grandchildren’s Future

As a Santa Barbara estate lawyer, I often meet grandparents who want to provide financial support for their grandchildren while ensuring their generosity doesn’t inadvertently create complications. Whether you’re thinking about college funding or creating a lasting financial legacy, strategic planning can help maximize your gift’s impact.

Understanding the Impact

Financial gifts to grandchildren can affect two crucial areas:

• College financial aid eligibility through the FAFSA process
• Potential tax implications for both you and your grandchildren

The good news? With thoughtful planning, you can structure your support to minimize these impacts while maximizing the benefits for your grandchildren’s future.

Strategic Giving Options

Here are several approaches worth considering:

529 College Savings Plans Recent changes to FAFSA rules have made 529 plans more attractive than ever. Grandparent-owned 529 accounts no longer count against financial aid eligibility in the way they once did. This means you can help fund education while potentially preserving aid eligibility.

Trust Structures

Specialized trusts can provide:

• Controlled distribution of funds at specific ages or milestones
• Protection from creditors or future divorces
• Flexibility in how the money is used
• Potential tax advantages for multiple generations

Annual Gifting Strategies

Consider using your annual gift tax exclusion strategically. For 2025, you can give up to $19,000 per grandchild without triggering gift tax consequences. A married couple can combine their exclusions to give up to $38,000 per grandchild annually.

Timing Matters

Strategic timing of your gifts can help minimize their impact on financial aid. For instance, waiting until after college graduation to provide substantial gifts might be more beneficial than giving during the college years.

Remember, the goal isn’t just to transfer wealth – it’s to do so in a way that truly enhances your grandchildren’s opportunities while preserving their ability to qualify for other forms of support.

Our experienced team can help you create a customized gifting strategy that aligns with your goals while protecting your grandchildren’s interests. Contact us at 805-946-1550 to schedule a consultation and explore the best ways to create a lasting legacy for your family’s next generation.