Not only can gifting assets to your grandchildren help them get a better start in life financially, but it can also help you by reducing the size of your estate and the tax due after you pass away.
An outright gift to each grandchild may be the simplest way to do this, and you can give them up to $16,000 a year (in 2022) before having to report your gifts. Also, if you are married, you and your spouse can both give gifts of up to this amount (bringing it up to $32,000 that could be given to each grandchild) without gift tax implications. These gifts also do not count as taxable income, although earnings will be taxed if these gifts are invested. However, keep in mind that gifts can have an effect on Medicaid eligibility.
You may be hesitant to give outright gifts to your grandchildren, especially if you wish for this money to be used in certain ways. If that’s the case, here are some options to consider: