By now, most folks are finished with their year-end and holiday gifting. Just in case you’re one of the millions of last minute shoppers with no idea what to get for your closest family members, consider helping them get some financial things done.
For younger children, consider starting a 529 college savings plan. Most plans allow for very small opening contributions. In some states, you may even qualify for a state income tax deduction for a portion of that contribution.
For children already in college, consider paying some of their college bills directly. Checks made out to the institution for tuition and fees do not count against the annual gift tax exclusion of $14,000 per donor.
For children recently out of college, this could be a good time to be sure that they’ve got their adult financial mind working properly. Help them understand their benefits at work. If there is a 401K, and your young adult is not able to afford contributions due to the high cost of living outside of the parental home, consider providing an incentive. For every dollar invested in a 401K, consider a matching gift so they can afford their lifestyle while making entry level wages. This will allow them to witness the power of saving and tax-deferred compound growth.
For young families, the range of possibilities expands significantly. The first may be a gift of professional services. The professional services needed by most young families include an attorney and some sort of financial guidance. For relatively simple situations, be certain that the young family has wills and trusts – especially if there are young children.
Families with young children need to be sure that they have wills for more than property. It is the will where you would appoint any successor guardian for minor children. Leaving this undone could mean a battle among family members regarding who becomes the orphaned children’s new ‘parents.’
The trust is significant in that it may prevent minor children from getting their hands on too much money too soon in life. While the possibility may be remote that both parents die while the children are still fairly young – the outcome could be horrible if you lack the proper structure. Don’t think that this is only for wealthy families. It can apply to anyone with a home, savings and life insurance. Do you think that $X in life insurance proceeds received directly by a 23-year-old may be the instigator of future bad decisions? Sadly, we all know that answer.
One inexpensive gift that may keep on giving is to be sure that your young family has adequate life insurance. For young, healthy adults it is most important that the need is calculated without rose-colored glasses and that the calculated need is covered. For most young families, the cost of term life insurance will be a lot less than the cost for you to assist financially after a catastrophic event.