(Nov. 28) -- When providing financial assistance to grandchildren, grandparents need to keep the tax consequences in mind. That's not so simple, particularly this political season.
"Given the situation in Washington," Barry L. Kohler, a financial adviser in Portland, Maine, told AOL News, "we have no idea what's going to happen tax-wise."
As it stands, each grandparent can give $13,000 a year to each grandchild without having to file a federal gift tax return. And there are other ways you can contribute that avoid the gift tax -- paying your grandchildren's educational expenses directly to the school, for example, or their medical expenses directly to the medical provider.
The tax laws are especially important if you are thinking about sharing some of the contents of your stock portfolio with your grandchildren. In the likely event that your tax bracket is higher than theirs, the capital-gains tax will be lower if you give them the stock rather than selling it yourself and giving them cash.
The advantage increases, though, if the stock goes to them after your demise. In that case, when your grandchildren sell the stock, they will not have to pay any capital-gains tax at all on the appreciation that occurred during your lifetime.
In all such matters involving important sums of money and taxes, Kohler advises, it makes sense to consult an expert.
SEE ALSO: Grandparents: The Givers Who Keep on Giving
Some Tips for Grandparents on Smart Giving
Nov 28, 2010 – 3:19 PM
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