Giving the gift of money

Q. Is it possible to open an account for my granddaughter without her Social Security number? I want to give it to her as a surprise when she graduates high school, but that’s not for five more years.
— Granny

A. Your granddaughter is very lucky, but unfortunately, this kind of surprise isn’t possible — unless you get a little creative.

You can’t open an account for your granddaughter without her Social Security number, said Allison Williams, a certified financial planner with Stonegate Wealth Management in Oakland.

But you do have options.

If you’re willing to let your granddaughter’s parents know about your gift idea, perhaps they’d give you the Social Security number without telling your granddaughter.

Then you’d be able to open a custodial account.

If you’d like to keep this a surprise from the whole family, you can always give a lump sum when she graduates.

“Once she turns 18, she will likely open her own account,” Williams said. “At that time, you can gift a lump sum.”

The gift exclusion for 2016 is $14,000, and Williams said the amount may be increased sometime in the next five years.

“If you are married, filing jointly, and were hoping for a slightly larger surprise, you are able to gift $28,000 – using your spouse’s gift tax exclusion as well,” Williams said.

If the funds are meant to be used for college, you can also consider opening a 529 plan for your granddaughter. The funds invested in the account would grow tax-free and can be withdrawn with no tax consequence if used for higher education purposes. Or, you could even directly pay your gift as a college tuition payment when she decides where she will study.

Karin Price Mueller writes the Bamboozled column for The Star-Ledger and she’s the founder of NJMoneyHelp.com. Click here to sign up for the NJMoneyHelp.com weekly e-newsletter. Like NJMoneyHelp.com on Facebook and follow it on Twitter.