Keeping things in proportion

(The letter was from grandparents secretly saving $30 a month for each grandchild to give the child at 18.) However, in our view the plan has several flaws that could defeat the donor's objective such as:

* As the investments are in the donor's name, there is a risk of the donor dying prior to gifting the investment.

* There is a risk that the planned gifts could be dutiable (say the intended gifts of about $10,000 to $12,000 are made to three grandchildren in the same year).

* There is the potential for half of each gift to end up in the hands of the grandchildren's future partners.

Each of these flaws could be addressed if the donor settled a trust for each grandchild and gifted the money to each trust.

Although the eventual gifts would likely be reduced by the costs associated with settling the trusts, they would have the potential to set each of these children up for life and beyond.

Advantages include:

* Eliminating the risk of the investments forming part of the donor's estate should he or she die prior to the culmination of the plan.

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