Grandparents Raising Grandchildren

• Financial Advice for Grandparents Raising Grandchildren

• Financial issues grandparents face
• Financial tips for grandparents raising grandchildren
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Financial advice for grandparents raising grandchildren

Many grandparents expect to enjoy retirement after raising their own children. But some find themselves raising grandchildren instead, often while living on a fixed income. The financial impact can be significant.

The 2000 Census found that 6.3% of children under 18 in the United States (4.5 million) live with grandparents as the head of household. In about a third of these cases, neither parent is in the home. These grandparents face the costs of parenting again at a time when they may have planned differently.

Financial issues grandparents face

Custody and legal fees are often the first hurdle. You need legal custody to enroll a child in school, access school records, or authorize medical care. If the parent contests custody, court costs can easily reach tens of thousands of dollars. You may also become financially responsible for the parent if they struggle with mental illness or substance abuse and cannot support themselves.

On top of legal costs, there are everyday expenses: food, clothing, healthcare, daycare, and education. If you're retired on a fixed income, these can strain your budget quickly. Planning ahead—for both the next few years and the long term—helps you adjust your finances to handle the added responsibility.

Financial tips for grandparents raising grandchildren

Start by deciding what you can actually afford. What lifestyle do you want to provide? Will you pay for college? Should your grandchild work part-time once old enough? These answers shape everything else, so think through them before you build your financial plan.

Look into government assistance. Many states offer subsidies for grandparent caregivers. The Temporary Assistance to Needy Families (TANF) program provides grants to low-income families. Contact your local Social Security Administration Office to check eligibility. If you're retired and don't qualify for government help, you may need to work longer to cover the new costs.

Get health insurance for your grandchild. Check private plans, Medicaid, and your state's Children's Health Insurance Program (CHIP). Start by calling your current insurance company to ask if you can add your grandchild as a dependent. For Medicaid or CHIP, contact your local Department of Social Services or Child and Family Services office. Your state Public Health Office can also direct you to low-cost or free programs.

Look into tax credits for childcare. The IRS allows you to deduct about 20% to 30% of childcare expenses (within limits), which typically saves $500 to $1,500 per year depending on your income. Some states offer additional credits, so ask your tax or financial advisor what applies to you.

Connect with other grandparents in your situation. Many organizations offer information on health insurance, legal issues, and education for grandparents raising grandchildren. AARP maintains a database of local support groups at www.aarp.org.

Review your life insurance. You're responsible for a dependent again, so make sure your grandchild would be provided for if you become disabled or die. Check that your current policy covers them.

Update your will and consider a trust. Your will should name a guardian for your grandchild if both you and your spouse pass away. You can also set up a trust to hold their inheritance, specifying how the money is used (like for college) and when they receive it. This delays distribution until they're mature enough to handle it responsibly.

Update your financial plan soon. Since grandparent caregiving often comes as a surprise, adjust your finances as quickly as you can. If you don't have a plan, meet with a financial advisor now. They can help you manage the new costs.

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Hypothetical example provided for illustrative purposes only. Does not take into account transaction fees or expenses. Past performance does not guarantee future results. This information is provided for informational purposes only. The information is generic and should not be relied upon in any particular situation without the advice of your tax, legal, or financial advisor. The views expressed may not be suitable for every situation.

American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.

This communication is published in the United States for residents of North and South Carolina only; and this advisor is licensed only in the states of North and South Carolina.
Roy P. Janse
Financial Advisor
American Express
Financial Advisors, Inc.
IDS Life Insurance Company
1150 Haywood Road
Greenville, SC 29615
Phone: (800) 554-0805 x141
Fax: (864) 234-7139