First-Time Grandparents: How You Can Help Build Lasting Wealth

Becoming a grandparent often brings a new question: how can you help create opportunities for the next generation? In this episode, Taylor explores several ways grandparents can support their grandchildren financially while maintaining flexibility and control. He discusses how different strategies can align with different goals, whether you're thinking about education, retirement, or creating a lasting family legacy.

Here’s what we discuss in today’s show:

🎁 Grandparent Goals: Helping grandkids for life

🎓 529 Power: Flexible long-term planning tool

📈 Roth Head Start: Decades of tax-free growth

💰 Super Funding: Front-load future opportunities

🏛️ Legacy Planning: Align gifts with your goals

⚖️ Control Matters: Ownership affects flexibility

Resources:

Website:  https://www.demarsfinancial.com/

Phone: (509) 536-9556

Schedule an introduction call with Taylor: https://bit.ly/demarspodcast

Check out Taylor's YouTube Channel: https://www.youtube.com/@TaylorMadeRetirement

Taylor's Newsletter: https://demars-financial-group.kit.com/827c64fe0e

Disclaimer: Since we don't know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Demars Financial Group, LLC or its members cannot be held liable for any use or misuse of this content. Advisory services offered through Demars Financial Group LLC, a Registered Investment Advisor. Demars Financial Group is not affiliated with LPL Financial.

Transcript

SPEAKER_01 0:02

Many of our clients are newly minted grandparents or about to become grandparents for the first time. So many times clients are asking us what I can be doing for my new grandson or granddaughter that would be most helpful for them over the course of their life.

SPEAKER_00 0:16

So today we're going to unpack two major options I recommend to clients and why.com.

SPEAKER_02 0:48

That's demarsfinancial.com. And maybe you want to drop a line into the team, an email into the team like what we're tackling here this week on the show, or just reach out to them either way. Click on that could we be a fit button and get some time onto the calendar with the folks there at Demars Financial. And uh yeah, Taylor, to your point, we're gonna tackle this email question uh this week that came in and see if uh, you know, kind of what kind of things you guys are dealing with when you you know encounter these situations. You guys have been in practice a long time, you, your dad, your granddad, right? So everybody's encountered some of this stuff, I'm sure. How you doing? You know right?

SPEAKER_01 1:21

I'm doing well, thank you. Yeah, thanks for uh taking the time. Excited to unpack this today.

SPEAKER_02 1:26

Well, let's talk about granddads, right? So I'm about to become a grandfather for the first time. That's the big question, right? Congratulations. Yeah. What can I do uh financially for you know for my grandson that will be most helpful for him over the course of his life? Many people find themselves in this situation with as a first-time grandparent.

SPEAKER_01 1:44

It's a big question, and it's a very generous question because clients are hopefully at the point where they're realizing, hey, I'm financially stable and my my my plan is able to take care of my needs, wants, and now there's some wishes that come up, including, hey, helping others, including other family members. And so I guess just to get to the cut to the chase, you know, there's a lot of talk about these Trump accounts that are coming out. And uh as the time of this recording, then none are officially opened because they are set to open in July of 2026. And I will say that it's not my first recommendation or even my second, just because of the lack of clarity around these accounts today. There's there's a lot of assumptions that are going around, but as far as how they actually impact or are taxed later in life, I'm not totally clear on how they work, but it is worth still opening these accounts. I mean it's a free thousand dollars if you're you're you know the grandchild is uh eligible. So worth capitalizing on that at a minimum. But what I'd like to steer attention to is two other options that I think are where most people land when they're trying to decide, you know, how do I financially help my my my grandchildren. And and I think what it boils down to is how you want the assets to be controlled. Actually, two-part question. One is how do you want the assets to be quite controlled? And then second is what do you want the money to do, right? Some clients say, you know, I just want to set up some money they can buy their car, first car, or set up for education, but I don't know where college is actually gonna be in two decades' time. So maybe that, maybe I want to, you know, to be able to save up for their first house, maybe for their own retirement, the list goes on. And so I just center in on two options that really depend on how you want the money to be controlled. The first option is one many people have heard of is a 529 college savings account. And with this type of account, you know, there's certain limits of how much you can contribute per year, uh, depending on the calendar year you're in. But you can also potentially superfund one and add up to five years worth of contributions all at once. So if you wanted to, if you had a huge chunk of change or you just wanted to front load that goal, you can do so. And the reason I suggest this account, even if you aren't necessarily trying to save for college, as is the you know, the name denotes, is the big beautiful bill from summer 2025 then allowed for a 15-year timeline to be fulfilled after opening a 529 account. And after that 15 years, you can start rolling over those funds into a Roth IRA. And the reason that's powerful is, you know, as many of our listeners are probably familiar, Roth IRA is tax-free funds. And but the catch is you can't contribute to a Roth IRA unless you have earned income. Now, unless your grandchild's the next Gerber baby, they're probably not making an income uh as a child, and maybe not until they're mid-teens. So the idea is okay, if we can start to be able to pre-fund a Roth IRA before they're technically even eligible to contribute to one via 529, then we get to start superfunding that that tax advantage account. Does that make sense?

SPEAKER_02 4:47

Yeah. Yeah. And we did, uh, Taylor, we did an episode on for grandparents. Uh I want to say back uh one of our earlier episodes, but uh, you know, this would be something worthwhile for people to go check out. I think it was, yeah, it was episode number 18, financial gifts for grandkids, right? Smart moves. So that can be something worthwhile to check out as well. Again, first-time grandparents, there's a lot of stuff that you're just trying to sort out, and there's a lot of new information to your point about the Trump accounts and things. So um, is that kind of part of the planning process when you kind of go through and do the review? Do you say, okay, what about legacy or what about gifting or how, you know, what are we looking at here?

SPEAKER_01 5:22

It is. You know, and our we start each client with a retirement readiness roadmap, which is a five-pillar process, starting with income, then investments, then taxes, then healthcare planning, and then finally but not least of all is estate planning, where we're making sure we're covering things like where your assets go when you pass, what happens if one spouse passes before the other, but also, yeah, what is your legacy? Where do you want your assets to go and what do you want them to fund? And this is often where conversations or questions like this come up. So, yeah, that other episode is probably a great one to reference. Maybe I'm thinking of things in that one that uh I'm not today, or vice versa. But um the 529 account is is a powerful one, even if you're not necessarily trying to save for college.

SPEAKER_02 6:02

Yeah, and they made some changes, right? So, like they you can now they can you can roll that to a Roth if they don't go to school, right? So, you know, there's some there's some the Security Act, you know, 1.0 and 2.0, and even this some of the stuff that's been passed under the One Big Beautiful Bill has kind of put the writing on the wall about doing more to prepare our ourselves and our youth for funding their own retirement. So some there's certainly some new options out there.

SPEAKER_01 6:24

Right. Yeah, and I I put my money where my mouth is. I have three children. I had opened three 529 accounts for each of them, and uh even opened one of them for my unborn child back uh about seven months ago, and and just because I knew that was where I wanted the dollars to. I wanted to just get that that timer, that that uh clock ticking for the 15-year timeline.

SPEAKER_02 6:43

Yeah, great point about that as well, for sure. So all right. Any final thoughts for for new grandparents to consider that you haven't covered already as we wrap up?

SPEAKER_01 6:50

Yeah, so I just mentioned the second account, which is much more simple. So I'll just cut to the chase is because if if if the the cash with a 529 account, however, is how the account is owned once they become age of a majority. Depending on you depending on how you set it up, they may be the sole owner of the account once they turn 18, maybe 21, uh, you may be able to retain custodial ownership of the account. But in any case, the funds have to go somewhere eventually. So you you there's a bit of a dead end as far as you know if it's being used for college or if it's all rolled into a Roth. If someone's looking for more simplicity, you can just do a plain Jane brokerage account, right? So you it's set up in your name, it's not necessarily in the grandchild's name because who knows how they're gonna turn out. You still have the ability to dole out money over their lifetime, your lifetime, however you best see fit. Uh the catch with that is you know, as that account grows, it'll have capital gains associated with it, and then you're just talking about that tax consequence. But it's a good problem to have when you when you have some money made on the account.

SPEAKER_02 7:48

All right. Well, good stuff to ponder, good stuff to think about. If this is on your radar, if you know you got a grandchild coming or whatever the case is, and you want to make sure you're you know putting that into your plan that's changed your life, obviously. Reach out to Taylor and the team and get started at demarsfinancial.com and get those questions asked and answered. That's demarsfinancial.com. And uh, you know, congratulations, right? You want to do the financial stuff, but you also want to enjoy the little ones as well. Taylor, thanks for hanging out with us as always. We appreciate your time. Don't forget to subscribe to us, folks, on uh Apple or Spotify, or check out Taylor's YouTube channel as well. All of that stuff again found at demarsfinancial.com. We'll see you next time here on Taylor Made Retirement.