What is a Grandfather Clause?
A grandfather clause is a clause that is included as part of a new law that exempts specific parties from the law due to practices that were in place prior to the law's implementation.
How Does a Grandfather Clause Work?
For example, consider a law that is passed stating that all buildings with three or more stories must be equipped with two elevators. There may be buildings that were built before the passing of that law that are structurally unable to accommodate this law. Consequently, the law's grandfather clause might state that all such buildings completed before a certain year are exempt and require no alterations.
Why Does a Grandfather Clause Matter?
When planning a new law, lawmakers often find that it is generally beneficial for certain entities and individuals to be exempt from the new law. This is often due to the fact that such parties have pre-existing conditions or practices concerning which the new law would prove to be unfair or cumbersome. A grandfather clause is therefore a way to minimize the harmful effects of a new law by limiting its application in cases where it would do more harm than good.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
