Most grandparents take considerable delight in making financial gifts that help secure their grandchildrens' futures or help with current expenses. When giving money, consider options carefully, as there are some key points to consider, financially speaking. Grandparents who wish to make substantial monetary gifts have many choices when giving cash, and it is essential to construct the gift properly to avoid tax penalties.
You're allowed to give away £8,450 in assets or cash per year, to as many people as you wish, without a gift tax. Your spouse can give the same amount to each person, which doubles the gift to £16,900, without paying a tax. A combined gift in this amount can be given to a couple's adult child, one to the child's spouse and one to each of their children. This gift would total £67,600 per year to a family of four. Grandparents can also pay a child's tuition, minus room, board and books, directly to the school the child is attending without paying taxes on the money.
529 Education Savings Plans
A good choice for those interested in funding a child's education is to set up a 529 Savings Plan. A 529 plan is specifically designed to fund tuition in state schools. Each person is allowed to deposit up to £42,250 to a 529 account. Those married are allowed to double the gift for a total of £84,500. You will not be taxed on earnings from this type of educational savings plan. The money can be used to pay for other expenses related to the child's education. Another benefit, you keep full control over the account and how the money is spent.
Tuition and Medical
Grandparents can pay for dental and medical expenses along with tuition for family members. These payments are separate from and not counted against your annual gift exemption. However, you must pay the tuition and medical expense direct to the school or medical provider. For instance, a grandparent could pay all health insurance payments for an entire family if the payments are made directly. This can come in handy in the case of job loss or other family financial crisis. You have the option of prepaying tuition for multiple years or paying the tuition annually. Some schools will lock in a price for tuition if you pay ahead for upcoming years.