19 Dec What’s the best way to leave money for my grandchildren?

Q. Years ago I set up a savings account to leave an inheritance to my 8 grandchildren. Just a few months ago I realized that I was not getting any interest on the account. Would it be possible for me to give each of them the inheritance without any problems? They all have savings accounts of their own so at least they would be collecting interest.
— Grandma

A. It’s wonderful that you’ve been planning to leave an inheritance for your grandchildren.

And yes, you can, but there are a few things you should know.

You can gift up to $19,000 per grandchild per year (as of 2025) without triggering federal gift tax, said Jeanne Kane, a certified financial planner with OneDigital in Boonton.

If you’re married, you and your spouse can each give $19,000 to the same grandchild, totaling $38,000 per year per child, she said. Gifts above this amount require you to file a gift tax return, but you won’t owe tax unless you exceed your lifetime exemption ($13.99 million as of 2025).

“Think of the annual $19,000 gift limit and the lifetime exemption of $13.99 million per person as a cup and saucer,” Kane said.

“Each year you can gift up to $19,000 to each of your grandchildren. That’s the cup,” she said. “If you gift more than that amount, then the extra counts towards your $13.99 million exemption. That’s the saucer.”

Given the high limit of the lifetime exemption, most people don’t have a federal gift or estate tax issue, Kane said, adding that gifts to your grandchildren are not taxable to them.

“Keep clear records of each gift, including the amount, date, and recipient, for your financial and tax records,” Kane said. “This documentation is important for both IRS compliance and your own estate planning.”

If your grandchildren are minors, consider whether their savings accounts are custodial accounts, such as those set up under the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act — UTMA/UGMA.

“A custodial account has an adult managing the account until your grandchild can do so when they become an adult,” she said. “In most cases, a parent will play this role.”

Many traditional savings accounts offer very low or even negligible interest rates today, Kane said.

“It’s important for your grandchildren, if adults or a custodian, on a minor account to identify a purpose for the inherited funds once received,” she said.

For example, are they saving for college, a down payment on a home or for retirement?

Different types of accounts may help save towards a goal better than a savings account, Kane said.

“For example, if the funds are being saved for college, a 529 account provides tax free growth on their investments that they wouldn’t get in a savings account,” she said. “This assumes that the funds in the 529 are used for qualified expenses such as tuition, fees, books, supplies, etc.”

She suggests you communicate your intentions with your grandchildren (or their guardians, if they are minors), including whether you have any stipulations on how you want the gifts to be spent. It is best to avoid misunderstandings and communicate your intentions up front, she said.

“Keep in mind that once the funds are given, the money is theirs to spend as they wish,” she said. “If you do have stipulations, you may want to consider a trust which can help manage them.”

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This story was originally published in December 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.