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Six Important Tips for Grandparents about Giving

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If you enjoy supporting your grandchildren financially – or if this support is one of your goals – you are not alone. Eighty-four percent of seniors say that creating a financially secure life for themselves and their family is an important goal.

Yet, deciding how to best help your grandchildren can be a struggle, especially if you share some of the same financial concerns as your peers. For example, you may be among the 27 percent of seniors who say changes to Social Security are most likely to jeopardize your retirement plans or the 23 percent who identify healthcare costs as the biggest threat.

When evaluating how much financial support to provide, consider the following:

• Give only what you can afford. Your own financial security should be your first priority. Since there is no way to know with any certainty how long you will live, how the market will perform, or how inflation may impact your purchasing power, make sure that you gift within your means. Doing so will help ensure your generosity today does not create a financial hardship for you — or your family members — down the road.

• Give equally. To help prevent family conflict and avoid damaging relationships, give equally to your grandchildren to the best of your ability. If you need to give more to help one of them through a rough patch, consider adjusting your will to even things out and clearly communicate your intentions to everyone involved.

• Clarify whether you are making a loan or giving a gift. If you are giving a gift, familiarize yourself with federal tax rules, which are based on the calendar year. For example, in 2012 you can give up to $13,000 to each of your children and grandchildren before the federal gift tax is applied. Also, be sure the recipient knows the money is a gift to alleviate any uncertainty about whether they are required to pay you back.

If you are loaning money to a grandchild, be very specific about the terms and repayment, and make sure you have a written document that both parties sign and date. This specificity will help safeguard your financial situation and ensure both of you are on the same page – now and in the future.

• Discuss your intentions. Only 61 percent of seniors say they regularly discuss money and finances with their family. If you would like to help support your grandchildren or save for their future goals like college or a down payment on a home, be sure to communicate this desire with their parents. This communication can help your adult children do a better job with their own financial planning. For example, if the parents of your grandchild know how much you are expecting to contribute to their child's education, they may be able to decrease the amount allocated to a 529 Plan and invest more toward other goals, such as their own retirement.

• Set appropriate boundaries. Even if you want to help your grandchildren financially, depending on their age, it may not be appropriate to do so. For example, many young parents take pride in their financial independence. The experience of letting them live within their own means can be an excellent teaching opportunity. Keep in mind the smart — and sometimes tough — financial lessons you learned as you made your own way as a new parent, and the pride that came with successfully overcoming challenges.

If you want to provide financial support to a family member, but have not incorporated it into your overall financial plan, consider consulting a financial professional. He or she can help you evaluate your financial needs and goals and create a strategy. A clear and realistic understanding of your own financial picture can help you identify how much you can comfortably give, as well as the most tax-efficient and effective way to do so.


1 The Money Across Generations IISM study was commissioned by Ameriprise Financial, Inc. and conducted by telephone by GfK in December 2011 among 1,006 affluent baby boomers (those with $100,000 or more in investable assets); 300 parents of baby boomers; and 300 children of baby boomers at least 18 years old. The margin of error is +/- three percentage points for the affluent boomers segment and +/- six percentage points for the parents and children of boomers segments.

Ameriprise Financial and its representatives do not provide tax or legal advice. Consult with your tax advisor or attorney regarding specific tax issues.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.

This communication is published in the United States for Texas only; and this advisor is licensed only in the states of CA, CO, FL, MO, NC, NM, OK, TX, and VA.

M. Ahmad Adnan, CFP®, CRPC®, RFC®

Financial Advisor

Business Financial Advisor

Ameriprise Financial Services, Inc.

3200 Steck Avenue | Suite 250 | Austin, TX 78757

Phone: 512.213.6400 Ext. 102 | Toll Free: 866.238.4230


© 2012 Ameriprise Financial, Inc. All rights reserved.

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