While creating a long-term investment portfolio to support grandchildren's financial needs, it's crucial to maintain proper documentation.
Grandparents often feel responsible for their grandchildren's well-being, whether it is financial security, career growth or leaving a legacy for them to remember. They provide monetary gifts to be managed by parents, or they get to access the funds themselves after they reach adulthood.
Regardless of the assets being distributed, transparency and communication are key in legacy planning to avoid potential tensions, disputes or perceived favouritism over the inheritance.
Grandparents can leave assets for their grandchildren through various legal instruments, each offering different benefits and controls. Minors may need help managing large sums independently if you gift them directly. Hence, you may have to consider certain safeguards if they haven’t reached financial maturity, or they will need to wait until they can access the funds.
Trusts are structured inheritance management methods that allow grandparents to specify asset distribution and appoint a trustee to oversee the process. They provide better control over funds, ensuring grandchildren receive money for specific needs like education or marriage, and shield assets from legal and financial challenges.
The Sukanya Samriddhi Yojana (SSY) is a government-backed scheme that allows grandparents to open an account for their granddaughters, providing tax benefits under Section 80C of the Income Tax Act.
Systematic Investment Plans (SIPs) and Fixed Deposits (FDs) are two options for grandparents to invest in mutual funds on their behalf for long-term wealth creation. SIPs offer flexibility and steady growth, while FDs provide safe, low-risk fixed returns. While creating a diversified, long-term investment portfolio to support grandchildren's financial needs, it's crucial to maintain proper documentation, whether it's SSY account statements, mutual fund records, property ownership, or beneficiary details. The paperwork must be clear, transparent and legally compliant.