Grandparents play a unique and important role in their grandchildren’s lives. However, some grandparents find themselves in the position of raising their grandchildren as primary caregivers. This is becoming increasingly common, with approximately 5.4% of children under age 18 living with a grandparent, and over 1 million households with children being headed by a grandparent without the child’s parent present.
There are many reasons for this trend, including high divorce rates, an increase in teenage and unwed pregnancies, a rise in the rate of parental incarceration, drug addiction, mental illness, and poverty. If you find yourself in the position of raising your grandchildren, it is crucial to plan carefully to ensure that your grandchildren will be taken care of if something happens to you. This planning becomes even more critical as grandparents age during their grandchildren’s minority years.
Basic planning steps include creating a Will that designates who should care for your grandchild if you pass away, designating someone to make financial decisions for you if you are unable to do so through a general durable power of attorney, designating someone to make healthcare decisions for you through a health care power of attorney, obtaining a “HIPAA” authorization form allowing for the release of medical information for you and your grandchild, and including “Medicaid triggers” in your planning documents so that your assets can be arranged to qualify for Medicaid for yourself, your spouse, and your grandchild.
If you have significant assets, more advanced planning may be necessary. Grandparents must be aware of the generation-skipping transfer (GST) tax, which applies whenever anyone gives assets to someone two or more generations younger than themselves. There are various techniques that can be used to pass assets for the benefit of grandchildren without paying the GST tax, such as paying for the grandchild’s tuition and medical expenses directly to the provider, setting up a “grandchild’s trust” that is irrevocable and must be used for the benefit of a particular grandchild.
Raising a grandchild can provide a stable, loving environment for the grandchild. Effective planning can help ensure that stability continues, to the extent possible. It is advisable to seek the guidance of a qualified estate planning attorney who focuses on estate planning to help you plan for your grandchild’s future, as well as your own.
Compliments of the McGee Law Firm, Attorney Brandon McGee