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David P. McCabe,
WMCP®, ChFC®, CLU®
Financial Planner
Nathaniel D. High, RICP®
Financial Planner
Nicholas J. Over, CFP®
Financial Planner
Sara E. Martin
Client Relations Manager
Jennifer A. McCabe
Client Relations Specialist
jennifer.mccabe@prudential.com
Centuria Financial Group
2333 Baltimore Blvd Suite B
Finksburg, MD 21048
Phone: 443-952-7232
November/December 2023
Want to Share Your Wealth with Grandkids?
When grandchildren are young, finding a cool toy or the latest electronics for them during the holidays is easy. But last year’s presents may be long forgotten when the next holiday rolls around. This year, consider giving grandkids gifts that will benefit them for many years. Your financial and tax professionals can help.
Annual Gifts
Wealthy grandparents can reduce their taxable estates by making annual gifts to grandchildren (and others) without paying gift taxes. For 2023, the annual gift tax exclusion allows you to give up to $17,000 per recipient — $34,000 if your spouse joins in the gift. Make sure you are confident that your grandchild will treat the gift responsibly before you gift a large sum.Pay for Educational or Medical Costs
Beyond what the annual gift tax exclusion allows you to gift tax-free, you can give unlimited amounts to your grandchildren to pay for school tuition or medical expenses. The only catch is that you must pay the school or medical facility directly.Head Start on Retirement
If your grandchild has earned income, you can contribute up to the lesser of that amount or $6,500 to a Roth IRA for your grandson or granddaughter. Withdrawals are tax-free at retirement, assuming qualifications have been met.Custodial Accounts
Consider contributing to a custodial account for your grandchild. Under the Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA), up to $1,250 of earnings are tax-free, while the next $1,250 of earnings are taxed at the child’s tax rate. (Additional gains are taxed at the parents’ rate.) However, there are downsides. Your grandchild’s ownership of the account could affect eligibility for financial aid. And your grandchild has full control of the funds at either age 18 or 21, depending on the state.Life Insurance
Another option is to purchase a life insurance policy and name your grandchild as a beneficiary. Generally, your grandchild will receive the proceeds tax-free when you die.This may be ideal for any special needs grandchildren. You can combine the policy with a trust to help ensure the money is spent properly, assuming the beneficiary cannot make those decisions.
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Centuria Financial Group is not affiliated with Prudential Financial. Centuria Financial Group sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Centuria Financial Group is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Centuria Financial Group and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Sara E. Martin and Jennifer McCabe are employed by David McCabe and not The Prudential Insurance Company of America or its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
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