How to leave wealth to your grandchildren

Rohit helps his widowed mother manage her money. She lives independently on her pension and invests the monthly surplus mostly in fixed income instruments.

She has adequate health insurance and an emergency fund in place. She now wants to give some of her wealth to her young grandchildren. She has sought Rohit’s advice on this. What all should he consider to help his mother?

There are two primary decisions Rohit has to make: how to make his mother’s wealth available to her grandchildren and whether changes need to be made to her portfolio. While his mother can choose to gift her wealth immediately, it will have tax implications as the income generated by the gift after the transfer will be taxed. Moreover, once a gift is given, it cannot be revoked easily. Gifting wealth at this stage may, therefore, impact her security.

A good option would be to bequeath the wealth to her grandchildren through a will, which will come into effect after her death. This will ensure she has money during her lifetime, if she needs it. Rohit can also make some changes in his mother’s portfolio.


As the pension she receives is more than sufficient to meet her requirements, her dependence on the investment corpus is not high. He should consider increasing the allocation to equity in her portfolio, to take into consideration the profile of her grandchildren who will benefit from it in the future.

The move to equity should be done over a period of time, so that it does not suddenly alter the risk profile of the portfolio. One way would be to invest the monthly surplus into an equity/balanced product, after providing for all her income needs. Also, the maturity proceeds from FDs can be allocated to equity. This will ensure that over time, the portfolio will move from low sgrowth to one that balances the requirements of both its current and future beneficiaries.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)