09/04/2013 05:43 pm ET Updated Nov 04, 2013

Honoring Grandparents Who Raise Their Grandkids

In 1978, Congress passed legislation proclaiming the first Sunday after Labor Day as National Grandparents Day. Presidents since Jimmy Carter have issued proclamations urging citizens to, in the words of President Barack Obama, "honor those who have helped shape the character of our nation, and thank these role models for their immeasurable acts of love, care and understanding."

At a stage in life when many people are already comfortably retired, some 2.7 million grandparents have taken on the responsibility of providing basic needs for their grandchildren, according to data compiled by Generations United. An alarming 21 percent of these vital caregivers live below the poverty line, even though 60 percent are still in the workforce.

All told, an estimated 7.8 million children under 18 live in households headed by grandparents or other relatives, including those whose parents are absent due to death, substance abuse, military deployment or other reasons.

Ironically, even though many of these "grandfamilies" barely scrape by, they save taxpayers more than $6.5 billion each year by keeping children out of the foster care system. So it only seems fair that many federal, state and local aid programs are available to help these guardian angels provide financial and emotional safety nets for their grandchildren.

Here are just a few of the many difficulties these families sometimes face:
  • If you become your grandchild's foster parent, you're responsible for day-to-day decisions and care, although the state retains legal custody and pays for the child's care.
  • Unless you establish some form of legal relationship (custody, guardianship or adoption), the parent may be able to take your grandchild from your home at any time. (Talk to a family law attorney to establish which form of legal relationship is best for your situation.)
  • In some states, it's difficult to enroll the child in school or get medical care without some form of legal relationship.
  • Guardianship subsidies are sometimes available to relatives to help raise children, but rules vary widely by state; usually the child must have been in foster care first.
  • Subsidies for adopting a special-needs child may be available; but again, rules vary by state.
  • Most senior-only housing complexes don't allow child residents -- which is legal -- so some grandfamilies are forced to move.

However, grandfamilies may be eligible for several federal tax credits:

  • A Child Tax Credit of up to $1,000 for each qualified grandchild, provided you claim them as dependents, they lived with you for more than half the filing year and are under 17 at year's end.
  • If you qualify for the Earned Income Tax Credit (a refundable tax credit for low-to-moderate income families), you may be eligible for an additional amount for grandchildren that lived with you over half the year and are under 19, full-time students or totally disabled.
  • Child and Dependent Care Credit, a nonrefundable tax credit for childcare expenses incurred so you can work or seek employment. (Employer-provided dependent care flexible spending accounts may actually be a better deal, depending on your income.)
  • If you adopt your grandchildren, you may be eligible for a nonrefundable Federal Adoption Credit of up to $12,970 per child.

In addition, depending on your income and the health/disability status of your grandchildren, you may also be eligible for benefits from Medicaid, your state's Children's Health Insurance Program, Temporary Assistance for Needy Families, SNAP (USDA's Supplemental Nutrition Assistance Program), LIHEAP (Low-Income Home Energy Assistance Program), which provides grants to help pay utility bills, and numerous other federal, state and local aid programs.

Helpful resources for grandfamilies include:
  • Grandparents Raising Grandchildren, a government-sponsored site that provides links to experts on subjects including Benefits and Assistance, Health and Safety Resources and Data and Publications.
  • AARP's comprehensive GrandFamilies Guide, which features everything from explanations of the different types of legal relationship options (custody, guardianship, adoption), to education and childcare options, to advice on finding local support groups.
  • Benefits QuickLINK, an AARP tool to find out whether you or your grandchildren qualify for 15 different public benefits (Medicaid, SNAP, etc.)

  • GrandFacts, a searchable database where you can locate key state and local resources, foster care policies and services, public benefits, financial and education assistance, and relevant state laws.
  • Generations United, an intergenerational advocacy organization whose Grandfamilies website highlights challenges often faced by these households, including housing, education, health, legal and financial issues, as well as links to resources where assistance can be found.
  • The Grandfamilies State Law and Policy Resource Center, a national legal resource for grandfamilies within and outside the child welfare system. Among its resources is a searchable database of state laws affecting grandfamilies.

Do something to honor your own grandparents this Grandparents Day. And if you know others who are raising their grandkids, make sure they know about the many available resources.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.