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Becoming a grandparent
Becoming a grandparent

You want the best for your grandchildren. When it comes to giving money, how can you make sure that your gifts produce positive results for you and them?

A little planning and information can go a long way when giving money to grandchildren (or their parents). There are ways to maximize the value of your gifts, as well as generate potential tax benefits for you, the child's parents and the child.

In this section, learn about ways grandparents can help out with college funding. Or, get ideas for giving financial gifts for other purposes, such as birthdays or graduations. Lastly, learn about the importance of inheritance planning1.

Before you give, always remember two important points:

  1. Make sure you have the financial resources to meet your current and future financial needs.
  2. Talk it over with the child's parents before going ahead with your plans.

College funding

Higher education is taking a bigger chunk out of the annual income of American families, according to the National Center for Public Policy and Higher Education. Sixty-four percent of college seniors graduate in debt, and the average amount of debt has nearly doubled in the last eight years.2

Fortunately, recent changes in college education savings programs make it easier than ever for grandparents to help out. Here is a brief look at today's most popular ways to save.

  Tax Advantages3 Considerations Contribution Limits4
529 College Savings Plan5
Tax-deferred earnings Withdrawals must be used for qualified higher education expenses Generally, over $200,000 can be invested for a single beneficiary
Tax-free withdrawals for qualified distributions Earnings are never capped
No income restrictions
Coverdell Education Savings Account (formerly the Education IRA5)
Tax-deferred earnings Withdrawals must be used for qualified higher education or K-12 expenses and post-secondary expenses $2,000 annual contribution per child up to age 18
Tax-free withdrawals for qualified distributions Contributions can be made by anyone Income limits: full contributions up to $95,000 for single filers and $190,000 for married, filing jointly
Custodial Accounts (UGMA/UTMA)5 Portion of earnings taxable at student's income tax rate Must be used for the benefit of the child None
Savings Bonds Tax-free interest if certain qualifications are met Withdrawals must be used for qualified higher education expenses None

A U.S. Bancorp Investments Financial Advisor can help you determine the best approach for your college funding plans. Contact U.S. Bancorp Investments1.

Learn more about paying for college

Financial gifts for other purposes

Along with educational needs, there are plenty of good reasons for helping out grandchildren with financial gifts. Here are a few ideas to help you make the most of a variety of gift-giving opportunities:

  • Giving on special occasions. Whether it's a birthday or graduation, why not help your grandchildren develop money-savings skills? You can select from a variety of savings ideas6

  • Teaching good spending habits to young children. Open a joint savings account6 in their name and yours and let them play a role in managing it. It's best to help them set goals, making some money available for short-term goals like a new bike or toy and earmarking other money for longer-term goals. Once the account is open, enroll in U.S. Bank Internet Banking to make managing the account fun and easy for both of you.

  • Teaching the value of saving and investing. In today's economy, many investment opportunities are within industries that are familiar to young adults - the Internet, wireless communications, fast food, clothing, retailers, video games, entertainment, etc. You can help teenagers experience firsthand the "ups and downs" of investing by opening a joint account with them.

    Open a joint investment account1  with U.S. Bancorp Investments

  • Helping older children with a first home. Rising home values have made it difficult for many first-time homebuyers to find a house they like and can afford. Grandparents can help with money toward a down payment or closing costs. Learn more about U.S. Bank home mortgage programs and services.

Inheritance planning1

It's important to plan your financial legacy. Left unplanned, taxes and other expenses can reduce a child's inheritance by up to 30%. Generation-skipping tax rules make gifts to grandchildren especially burdensome.

Inheritance planning can range from simple financial gifts to complex estate planning.

If you simply want to identify ways to maximize an inheritance to grandchildren, talk to a U.S. Bancorp Investments Financial Advisor1.

If your assets include a business, extensive real estate or investment holdings, the trust professionals at U.S. Bank can help you achieve more complex estate planning goals. Learn more.

Learn more on our Web site:

Learn more about financing an education

Paying for college

Learn more about Personal Trust

Use our additional calculators to help you plan:

Calculate how much your savings could be worth over time

What will it take to save for an education?

  1. Securities and Exchange Commission Rule 11Ac1-6

    U.S. Bancorp Investments, Inc. has prepared the linked report pursuant to U.S. Securities and Exchange Commission rule 11Ac1-6 requiring quarterly reports of order routing practices. The report provides information on the routing of any order that the customer has not specifically instructed to be routed to a particular venue for execution. For these non-directed orders, U.S. Bancorp Investments, Inc. has selected the execution venue on behalf of its customers. View the U.S. Bancorp Investments, Inc. 11Ac1-6 report.


    Investment products and services are available through U.S. Bancorp Investments, Inc., member FINRA and SIPC, an investment advisor and a brokerage subsidiary of U.S. Bancorp and affiliate of U.S. Bank.
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  2. The National Center for Public Policy and Higher Education 5/2000.
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  3. This discussion is intended to be informational only and is not exhaustive or conclusive. U.S. Bank and its representatives do not provide tax or legal advice. Each individual's tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.
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  4. Contribution limits vary by state. As signed into law, the recent tax law changes are subject to a sunset provision for years beginning after December 31, 2010. Future legislation may extend or repeal these provisions.
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  5. Funds may be insured by the FDIC. Amounts deposited with a depositary institution and meeting certain qualifications may be insurable. Please contact a banker for details.
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  6. Deposit products offered by U.S. Bank National Association. Member FDIC.

    For U.S. Bancorp Investments:
    Investment products and services are available through U.S. Bancorp Investments, the marketing name for U.S. Bancorp Investments, Inc., member FINRA and SIPC, an investment adviser and a brokerage subsidiary of U.S. Bancorp and affiliate of U.S. Bank.
    Insurance products are available through various affiliated non-bank insurance agencies, which are U.S. Bancorp subsidiaries. Products may not be available in all states. CA Insurance License# OE24641.

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