Grandparents who want to provide for their grandchildren and are in possession of resources that exceed the unified gift/estate tax exclusion amount have some options.
One possibility would be to start a trust for the benefit of a grandchild. If you want to set aside resources without being subject to the gift tax, you could give gifts in trust equaling as much as $13,000 per year without incurring any gift tax liability.
An option that is available to you if you have minor grandchildren would be to take advantage of provisions contained within the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act.
Under these acts, you may convey resources into a custodial account for the benefit of a minor. The $13,000 annual exemption also applies to deposits into one of these accounts.
If you have grandchildren who are of college-age, you may want to consider paying for their college tuition. You are allowed to pay the college tuition of any number of students equaling any amount of money free of the gift tax.
You must pay the school directly rather than giving the money to the student. This exemption does not extend to the payment of fees, living expenses, or book purchases.
But once again you could use your $13,000 per person annual exemption to provide some cash to a grandchild that you are sending to school. If you are married, both you and your spouse could use your respective exemptions to transfer as much as $26,000 each year to each of your grandchildren.
Giving tax-free gifts is a good way to shift money out of your estate for tax purposes while it is being utilized for the well-being of your grandchildren.