How Raising a Grandchild Changes the Estate Plan

Takeaways

• Raising a grandchild can change a grandparent’s finances, retirement plans, and family responsibilities, making an outdated estate plan no longer fit their needs.

• Caring for a grandchild does not automatically give a grandparent legal authority

• Grandparent caregivers should plan for who would care for the child if they are one day unable to themselves

Grandparents have always played an important role in helping raise younger generations. From picking children up from school to providing childcare while parents work, they step in when families need an extra set of hands. 

Sometimes, however, merely “helping out” becomes more. And when it does, it can reshape retirement, finances, and family relationships. It can also expose holes in an estate plan created for a different future.

A will might still reflect a time when all the grandparent's children were grown and independent. Life insurance may name beneficiaries selected years earlier. Powers of attorney may have been drafted before anyone anticipated that a minor child would depend on the grandparent every day.

Grandparents often become caregivers by responding to the immediate question: Who will take care of this child right now?

Estate planning asks them to look one question further ahead: Who will take care of this child when I no longer can?

The Changing Face of Grandparenthood 

Picture a grandparent, and what do you see? 

Perhaps an elderly man or woman, occupying an armchair, book in hand, a warm mug of tea steaming on an end table. A grandmother might be knitting a new pair of socks for a grandchild; a grandfather might be working on a crossword puzzle. 

Descriptions like these may sound cliché or outdated — because they are. Many grandparents today are “solo agers” who are single, live alone, and have no familial support from a child or spouse. They're as likely to be active and outdoorsy as they are to be sedentary and indoors. 

However, grandparents are also more likely to be caregivers than in years past.

The scale of grandparent support is considerable. A Harris Poll survey found: 

• Forty-two percent of working parents rely on grandmothers for childcare.

• Forty-one percent turn to Grandma first when an unexpected childcare issue requires unpaid help. 

• Among working parents who rely on grandmothers for care, 67 percent said they could have lost their jobs without that help. 80 percent admitted that care allows them to pursue their career goals.

• Twenty-nine percent of working parents who rely on unpaid childcare said they wouldn't be able to afford it otherwise.

Additionally, 1 million U.S. children live with a grandparent solely responsible for meeting their basic needs.

Grandparent caregivers are, in some respects, the flipside of so-called “solo agers.” They’re expected to support their grandchildren at an age when older adults are rejecting traditional quiet retirements by traveling and staying active in record numbers. 

After surveying over 100 grandparents, Business Insider found they’re taking on roles far different from the retirement they once imagined. This includes grandparents who became primary caregivers and remained financially responsible for grandchildren well into later life. 

When A Temporary Arrangement Turns Into a Long-Term Commitment

Grandparent caregiving often begins out of necessity and without much planning. A parent can pass away, struggle with addiction, become incarcerated, or experience serious financial problems making them unable to care for a child. 

A child may stay with Grandma and Grandpa “for a few weeks” while a parent gets back on their feet. School arrangements change, clothes and furniture move, and the grandparent starts buying groceries and attending parent-teacher conferences.

 Weeks become months. Months become years. A temporary caretaker effectively becomes a parent. 

• Nearly six in 10 grandparent caregivers have been caring for their grandchildren for five years or longer. 

• Although the overall number of primary caregiving grandparents declined between 2009 and 2021, the number of caregivers age 60 and older increased. 

• Among those raising grandchildren without a parent present, the increase was 20.6 percent.

That combination of longer caregiving arrangements and older caregivers creates legal and estate planning issues not present previously. 

Grandparent Caregiving Duties Vary Widely

Not every grandparent caregiver has a grandchild living under their roof full-time. Families often traverse a spectrum spanning occasional babysitting and becoming, effectively, a full-time parent.

But a grandparent doesn't need to wait for a formal custody order to amend their estate plan. If the family now depends on the grandparent more than when the plan was created, the plan may need updating.

Whatever legal arrangement a family decides upon, estate planning should be part of the planning equation. Review any wills, trusts, powers of attorney, beneficiary designations, life insurance, and incapacity plans accordingly.

Raising a Grandchild May Not Amount to Having Legal Authority

Acting like a child's parent and being authorized to act as one are, legally, not the same thing. 

A grandparent who lacks legal custody or guardianship may encounter problems making medical, educational, and other important decisions. Generally, they cannot consent to healthcare for a child unless they have established the necessary legal authority. Some states provide alternatives such as caregiver authorization or medical-consent laws. 

Check what legal authority the grandparent actually has over the child. Some pursue custody, guardianship, or adoption. Others keep the arrangement informal because the child's parent remains involved or formal proceedings present financial complications. The grandparent’s legal authority affects what additional planning may be needed if they become incapacitated or die.

The Grandchild May Now Be a Financial Dependent

A grandparent may have created an estate plan years ago with a basic premise: provide for a spouse, divide remaining assets among adult children, and maybe leave something to grandchildren. 

But raising one of those grandchildren changes the equation. 

The grandparent may now be paying for food, clothing, healthcare, transportation, school activities, technology, sports, college savings, and everyday household costs. 

Yet grandparent caregiver households tend to have fewer financial resources to absorb them. Thirteen percent of children living with grandparent caregivers are in deep poverty (household income below half of the federal poverty threshold) compared to only 8 percent of children in parent-led households.

These added financial pressures can also collide with retirement. The average grandparent caregiver is 62. Some need to postpone retirement or return to work because of the costs of caring for grandchildren. 

Several estate planning points emerge from this:

• Does the grandparent want to leave additional resources for the child being raised?

• Should those assets pass outright or through a trust?

• Who should manage the money while the child is young?

A trust can preserve money for a grandchild while placing responsibility for its management with an adult trustee. This is especially useful when the grandchild is still a minor.

Who Takes Over If Something Happens to the Grandparent?

Grandparent caregivers often step in because nobody else can. But who steps in for the grandparent when they need help?

Roughly one in four grandparents living with grandchildren has a disability. Children in grandparent-caregiver families are also more likely to live with someone who has a disability.

For someone raising a young child, those numbers bring mortality and incapacity planning much closer together. And for a grandparent caregiver, incapacity can destabilize two lives at once.

Suppose a grandmother raising a 12-year-old suffers a stroke and spends several weeks in the hospital. Someone must manage her mortgage and bills while also making sure the child goes to school, has somewhere to stay, receives medical care, and continues to have access to necessary resources.

Estate planning is not only about what happens after death. Durable powers of attorney and healthcare directives protect those who become unable to handle their own affairs.

An estate plan cannot automatically dictate custody. A surviving parent may retain legal rights, while state law governs guardianship and custody. Leaving custody questions unresolved, though, may create complications later. 

A grandparent caregiver should identify who could realistically step in if they die or become unable to provide care. They can work with an attorney to coordinate that possibility with the child’s existing legal arrangement and the resources available for their support.

Caregiving Can Change Retirement—and the Estate Left Behind

Raising another child is expensive at any age, but doing it at or near retirement can be particularly disruptive. 

Some grandparents postpone retirement because of caregiving expenses, while others return to the workforce. Business Insider's interviews with more than 100 grandparents put individual faces on these statistics. They highlight older adults continuing to work late in life while handling financial responsibilities they never expected to carry during retirement. 

That affects estate planning beyond changing names in a will:

• Money intended for retirement may now pay household expenses.

• Education costs can replace travel plans.

• Savings may dwindle more quickly.

As the grandparent's financial life changes, their estate changes with it, which can raise sensitive questions about fairness.

How remaining assets will be divided should be revisited. If one grandchild has received substantial lifetime support because the grandparent effectively raised them, decide whether that should — or should not — affect later distributions. There is no single correct answer. But an estate plan written before caregiving began may answer those questions by default rather than an intentional choice based on current circumstances.

Life Insurance and Beneficiary Designations Deserve Another Look

A will controls only part of what happens to someone's property when they die. 

Life insurance, retirement accounts, and other assets often pass according to beneficiary designations. These forms are easy to overlook because they may have been completed decades earlier. A grandparent who has become responsible for a minor child should consider whether their existing choices still fit.

Life insurance can be particularly important because it can provide funds at the time a family loses a caregiver. For example, an 87-year-old grandmother used proceeds from her daughter's life insurance policy to help pay bills and send the two grandchildren she was raising to private school. Her story illustrates the role insurance can play after the loss of a parent or caregiver. 

A grandparent caregiver should review beneficiary designations as part of the broader estate plan. Naming a minor grandchild directly can create unwanted complications. A trust or other planning mechanism may provide a way to manage those funds until the child is older.

Changing Caregiver Roles and Changing Estate Plans

Estate planning attorneys remind clients that a plan should be revisited with major life events. Becoming a caregiver to a grandchild is one of the biggest life changes a grandparent can experience.

If you’ve recently started caring for a grandchild, or plan to provide care for one, talk to an attorney about how your plan should keep pace.

Additional Reading

For related articles on estate planning and grandparent caregiving, please see:

• Probate Process: A General Timeline

• Honoring Family Caregivers Month: Resources for Grandparent Caregivers