Editor’s note: Marguerita (Rita) Cheng is a longtime columnist with Rethinking65. To read more of her articles, click here.
The world has changed from the days when the nuclear family — two parents and their children living together under one roof — was the norm. Now there are blended families, same-sex families, adopted families and relatives who take on the parental role as guardian.
In 2021, approximately 6.7 million grandparents lived in a household with their grandchildren, according to the American Society on Aging. Of those, 2.1 million were primary caregivers for their grandchildren. Grandparents take on this role for many reasons including parental mental illness, substance abuse, child abuse, financial strain and incarceration. Children can gain a lot from being under the care of an older person, including having a safe and stable home life and staying connected to their blood relatives and community.
Many of these older relatives or grandparents didn’t expect to become a “parent” again in their twilight years. Many live on fixed incomes. Now they’re paying for food, clothing, diapers, medicine and other items for a young person.
A friend of mine from college retired at 58 after his adult son passed away unexpectedly, leaving a young child. My friend and his wife became the primary caregivers for their grandson. The wife is still working but my friend started collecting his pension early after 35 years with his employer. I helped him navigate how to apply for Social Security benefits.
Social Security Must-knows
Social Security benefits can provide critical help, allowing grandparents and non-parental adults who step into the guardian role to take care of themselves and their families. When a caregiver applies for benefits, the first step is getting the child’s Social Security number. This will help the caregiver claim the child on their income tax return, obtain medical insurance and get access to government services for the child.
If a caregiver plans to adopt a child who lacks a Social Security number, the Social Security Administration can assign a number before the adoption is complete. The caregiver can apply for the number using the child’s new name and the caregiver’s name as parent. There’s no charge for getting a Social Security number and card.
“Social Security will pay benefits to grandchildren when the grandparent retires, begins a period of disability, or dies, if certain conditions are met,” according to the Social Security Administration. “Generally, the biological parents of the child must be deceased or have a disability, or the grandparent must legally adopt the grandchild.”
Within a family, a child can receive up to half of the parent’s full retirement or disability benefits. If a child receives survivors’ benefits, they can get up to 75% of the deceased parent’s basic Social Security benefit. The parent’s basic Social Security benefits are determined by using average indexed monthly earnings.
Important Figures
For 2024, the benefit is the sum of: 90% of the first $1,226 of averaged indexed monthly earnings, 32% of earnings between $1,226 and $7,391.and 15% of earnings above $7,391.
The child must have lived with the grandparent before they turn 18 and received at least one half of their support from the grandparent for the year before the month the grandparent became entitled to retirement or disability insurance benefits or died. The child will not be eligible for benefits if the biological parent is providing consistent contributions to the child’s support. If the grandparent and spouse are already receiving benefits, they would need to adopt the child in order for the child to be eligible for benefits.
“Dependents who are eligible include natural, adopted and foster children who have not reached age 18 and family members who cannot care for themselves,” the Social Security Administration states. “All dependents must live with the Social Security account holder for more than half the year and be claimed on their federal tax return.”
Survivor Benefits
Losing a parent is emotionally, financially and physically hard. Benefits can ease the financial burden.
Widows, widowers and their dependent children may be eligible for Social Security survivor benefits. Survivor benefits provide monthly payments to eligible family members of people who worked and paid Social Security taxes before they died.
A person may qualify for survivor benefits, if they are the spouse, divorced spouse, child, or dependent parent of someone who worked and paid Social Security taxes before they died. A qualifying individual could get a monthly payment and also be eligible for Medicare.
“We base the monthly benefit amount on the earnings of the deceased parent,” according to a blog on the Social Security Administration website. “The average surviving child benefit is more than $1,000 per month. We pay benefits until the child turns 18 or 19, if the child is in high school, and is not married. A stepchild, grandchild, step-grandchild, or adopted child may be eligible for monthly benefits under certain circumstances. If a child in your life has lost a parent, it’s important for the child’s family to reach out to us as soon as possible. The date you contact us to file an application can affect when the child’s benefits begin.”
A grandparent or other adult serving as a foster parent or legal guardian can add the child to their insurance plan until that child turns 26. But if the adult is not the child’s foster parent or legal guardian, the child will not be eligible for coverage under the adult’s insurance policy.
If a grandparent receives health insurance through Medicare and the child is 18- to 26-years old, the child can get health coverage though their specific state’s marketplace/health exchange. Another option may be their state’s Children’s Health Insurance Program (CHIP).
Child Tax Credit
A grandparent raising a grandchild could be entitled to a child tax credit if the child meets the eligibility rules. To qualify, the dependent must be under 17 at the end of the year, provide no more than half of their own financial support during the year, live with that adult more than half the year, and be claimed as a dependent on the grandparent’s tax return. The dependent must also be a U.S. citizen, U.S. national or U.S. resident alien, according to the IRS website.
The child tax credit for the 2024 and 2025 tax years is $2,000 per child. According to the Tax Policy Institute, the credit is reduced by 5% of adjusted gross income over $200,000 for single parents ($400,000 for married couples). If the credit exceeds taxes owed, taxpayers can receive a credit of up to $1,700 in the 2024 tax year
The current child tax credit will expire at the end of tax year 2025. At that time, it’s scheduled to decrease to a maximum $1,000 per child.
Other information for grandparents and non-parental adults who raise children can find more information at Grandfamilies.org.
Grandparents who become guardians of their grandchildren face a rocky road. Benefits and financial assistance can smooth the way. After all, they should be enjoying their time with their grandchild while raising them.
Marguerita (Rita) Cheng, CFP, is the chief executive officer of Blue Ocean Global Wealth. She is passionate about helping clients navigate some of life’s most difficult issues — divorce, death, career changes, caring for aging relatives — so they can feel confident and in control of their finances. Rita is a past spokesperson for the AARP Financial Freedom Campaign. She volunteers her time as a SoleMate for Girls on the Run, raising money to win scholarships for girls.
