Let’s be honest—most grandparents take pride in spoiling their grandkids. From ice cream outings to toy shopping sprees, Grandma and Grandpa rarely say no when those little ones make a request.
But it’s also a reality that grandparenting can come with a hefty price tag. Research conducted by the Senior List in 2024 determined that 96% of all grandparents provide some kind of financial support to their grandchildren at an average of $3,948 annually. At the time of the survey, it was reported that of the grandparents surveyed:
Grandparents who want to provide financial support for their grandchildren have several smart strategies available to make their contributions go further.
Education funding is an area where grandparents often get directly involved. Especially with the ballooning amount of student loan debt carried by millennial parents themselves, saving for their kids’ college becomes a bigger challenge every year, and many parents indicate that the help of grandparents is essential. Grandparents can utilize their state’s 529 plan, making gifts into a qualified account that grows tax-free until the grandchild is ready for college. Funds from the plan can then be withdrawn tax-free to cover qualified expenses such as tuition, books, lodging, and other necessary outlays for higher education.
Grandparents can also set up or contribute to a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account, which is managed by a custodian (often the grandparent or parent) until the grandchild reaches the age of majority, specified by state law. While these accounts don’t grow tax-free like 529 plans do, UGMA/UTMA accounts can be used for a wider variety of child-related expenses, which includes education. It’s important to note that once the grandchild reaches the age of majority, the UGMA/UTMA assets legally become their property.
For older grandchildren who have earned income (subject to income limits), grandparents can make cash gifts into the grandchild’s Roth IRA account. These funds will grow tax-free for the rest of the grandchild’s life. In 2025, individuals can contribute up to $7,000 to a Roth IRA. If you’re age 50 or older, you’re eligible to contribute up to $8,000, thanks to the catch-up contribution allowance.
The IRS allows individuals to transfer a specific amount of assets each year to multiple recipients without triggering lifetime gift tax implications. This is known as the annual exclusion. For 2025, the annual limit per recipient (made by each gift giver) is $19,000.[1] In other words, Grandma and Grandpa together can gift each grandchild a combined $38,000 (in 2025) while staying under the annual exclusion limits. Please note that gifts made to minors need to be directed toward an account made for their benefit (529 Plan, UGMA/UTMA, trust account). All of the strategies outlined above (529 Plan, UGMA/UTMA, Roth IRA) count toward the annual exclusion gift limit for that grandchild.
Grandparents may choose to establish a trust account with a grandchild designated as the beneficiary. They have the ability to determine the age at which the grandchild can receive distributions and specify how the funds should be used.
Including a grandchild in a will ensures that financial gifting intentions are honored after one’s passing while preserving access to funds during their lifetime in case of unforeseen needs. By designating a grandchild in the will, individuals can allocate cash bequests or gift specific personal property, such as jewelry or a vehicle.
In conclusion, grandparents who wish to provide financial support should integrate a gifting strategy into their broader financial plan. Modera Wealth Management helps grandparents and parents create thoughtful plans that align with their goals. These plans can help ensure long-term financial stability while allowing them to experience the joy of supporting future generations.
To learn more about gifting strategies for family members, please reach out to your Modera advisor.
[1] https://www.nerdwallet.com/article/taxes/gift-tax-rate
[1] https://www.nerdwallet.com/article/taxes/gift-tax-rate
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