By: Kailey Boraas, Trust Officer 

The desire to give to grandchildren is all too common and often very much appreciated by those on the receiving end.  

The main question to ask yourself is if you are comfortable with giving the grandchild total control over the funds or if you prefer a bit of oversight. Depending on how you feel, and it is okay to want the control, often it can be in their best interest. Before we go ahead and write that check to your grandchild, let’s walk through some different ways to go about the gift:

  1. Custodial Account – a UTMA/UGMA are great accounts that can be used as a savings account for the benefit of someone under the age of 18, and then at age 18, they would have full access to the savings. These can be opened at most banks, just like a savings account, or with a trust department if you wish to look at investment options.

  2. An Outright Gift to a Grandchild – Currently able to gift $15K in 2020 to an individual before needing to file a gift tax return.

  3. Trust FBO Grandchild – Ability to set exact guidelines on how you’d like the money to be used and when they would receive the funds and have a trust department, like First Western Bank & Trust, serve as trustee to ensure the trust is handled correctly.

  4. 529 Account – Tax advantage savings tool to save for a child’s education-related expenses. 

  5. Gift Money to an IRA for the Child – If your grandchild has earned income in a year, you can contribute to an IRA on their behalf as long as the gift is not greater than their earned income for the year. Must follow IRA contribution rules in any given year. No tax benefit to you, but a great savings tool for the child’s future retirement.

These five ways are a starting point for gifting to a child/grandchild, as there are also tax considerations to discuss. Visit with your financial or tax advisor to help narrow down which strategy best fits your goals and the child’s situation.