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Old 06-14-2017, 03:41 PM   #21
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Old 06-14-2017, 04:25 PM   #22
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My personal opinion...giving kids too much of anything does not benefit them in the long run. That is how we all learn and grow and there is nothing like necessity as a good teacher. We have helped our grown kids and I have money saved for the grandkids but it is very modest and won't change the way they live their own lives. What do you say on here...YMMV?
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Old 06-14-2017, 04:46 PM   #23
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OP: You need a CPA or an estate planning attorney to help you sort through the options. Getting a bunch of random opinions gleaned on the internet is not a wise way to manage serious money in a tax-efficient manner.

Also, remember that at 18 years the human brain is not yet mature. IIRC, judgment skills are some of the things that are still lacking. I vote, with the others, against the part of your plan that gives them a lot of money at that age. One technique that is common is to distribute the corpus of a trust in fractions at specific ages. Like 25% at age 25, 50% of the current balance at age 35, and the remainder at age 45. Trusts can also protect against legal judgments, divorce issues, etc.
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Old 06-14-2017, 04:55 PM   #24
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Also, remember that at 18 years the human brain is not yet mature. IIRC, judgment skills are some of the things that are still lacking. I vote, with the others, against the part of your plan that gives them a lot of money at that age.
I have to agree. I seriously doubt that my 18-year-old self would have been a wise steward of a large amount of money and I had to learn (the hard way of course) the high value of delaying immediate gratification for long-term gain.
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Old 06-14-2017, 05:27 PM   #25
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In my array of friends I know of two who were given a similar amount of money, one at age 18 another (via trust) at 35. The 35 year old attended college, got a degree, found a responsible job, and has a family. The 18 year old also attended college, but never felt the need to work, blew through the money during his 20s, became homeless, and died alone at a young age.
Oh wow, that's very sad! But it does illustrate the problem well: there is no possible way to know what your 6-yo will be at age 18. Sure you do your best to bring them up to be decent, well-rounded adults, but as others have said, when it comes right down to it, you have frighteningly little influence at the end of the day. Once they reach their teens, they start orienting themselves toward friends, peers, anything but their parents. Well, yes, there may be a few exceptions of late-bloomers, but don;t bank on the hope yours will be those exceptions
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Old 06-14-2017, 08:44 PM   #26
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I think put some money in 529 is not a bad idea. If they don't use it, you can keep it.
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Old 06-16-2017, 07:49 AM   #27
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Lol... Yes. I calculate that I would hardly touch the nest egg ($1.5M). We have 4 pensions kicking in after retirement (2 military retirements ($7,000 per month combined) plus 2 social security ($6,500 per month combined). Plus the bull market...

How do 2 people who retire in their early 40's get $6,500 combined in SS? Even if both of you wait until 70, don't you have a lot of 0's averaged into your top 35 earning years?
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Old 06-16-2017, 08:44 AM   #28
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I think put some money in 529 is not a bad idea. If they don't use it, you can keep it.
You can keep it but subject to income tax on growth and a 10% penalty if not used for eligible expenses.
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Old 06-16-2017, 09:44 AM   #29
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The challenge is not just how you raise them - it is how much they get influenced by peers, which at 18 is going to be a tremendous challenge. Once others find out about it can be tough to fend them off. As an example, look at the young athletes who get big, even moderate money in their late teens or early 20s, and the financial failure rate that occurs.

I do not much about them, but if you really want to leave them a windfall maybe a trust that starts at a particular age and pays out money periodically would be a better bet than providing access to a lump sum.
+1
I love my son's lol I really do but i was amazed at how much common sense went out the window when their dad died leaving them some cash. Lol I said it before younger son who was a smart college kid immediately had vision of installing a pole in the living room for his poor misunderstood friend "cinnamon ". Who really is a ballerina have to admire the kid's wanting to help those less fortunate.
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Old 06-16-2017, 09:49 AM   #30
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So basically what i did was set up a trust with a boat load of stipulations. Right now they are 22 and 24. I remind them that they are in college loan free. One will go to law school loan free. They drive cars note free. They have to work for any thing else and until they are 35 (yep i said 35) I'm still in control. Personally I think they've got it good.
They are great kids but I also think they are pretty normal. They have pulled stunts that have left me shaking my head.
Speak with an estate attorney there are plenty of options to gift kids. Not sure if they are all tax free
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Old 06-16-2017, 10:01 AM   #31
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Agreed... Thank you for your comment. Yes. I am really hoping that I don't let them down and raise kids that would not appreciate such a gift. My work is cut out for me.

Honestly, the two other options are donate to charity or for us to spend like crazy in our golden years. I would prefer to give it to the kids. When I learned that I was going to be a father, my wish was to give them more than I had growing up. My mother was a single parent, raised 3 kids, and we had almost nothing. There was hard times when I was a kid. That taught me to be frugal. Frugal to a point where I just got a cell phone. Even now, when we have almost $2M in assets, I still clip coupons and use groupon.

So, just trying to do the correct estate planning.
Revisiting this for a moment: My parents had nothing when I was born. They worked hard, scrimped and saved and made certain that (with us also working and saving) us kids could get a good education. We appreciated it because it cost US as well as mom and dad. When time came for our kids to go to college, we did help, but made sure it was "hard" on the kids as well. They had to do their part. Buying into the process made them stronger and they also appreciated what they had when they were finished. What we have done to see that "they have more than we did" is to help with things like student loans and house down payments - once we have seen how hard they are willing to work for what they want. They have never asked for help, so we feel really good about offering it because we know what the effect is on their lives.

If I'm making a point, it is that I understand being "without" and how that affects us in relation to the next generation. BUT making it too easy on kids is no gift IMO. Let them struggle, help a little as you see them needing a little help. Then later, you can step in when they are old enough to appreciate it and also use it wisely.

If all this means that you pay a little more taxes in the mean time, so be it (heh, heh, Uncle Sam needs the money!) Sure, fund the 529s up to a point, but don't get carried away. Keep your "powder" dry for when they need it and go from there.

I rarely give this much specific advice. I never think I have enough experience or knowledge to do so. But in this case, I think I know "where you live" so to speak.

Still, this is a decision that only you can make and nothing anyone says is Gospel. You'll still be responsible (along with your kids) for the outcome(s). So eventually, you'll just have to go with your gut because YMMV.
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Old 06-16-2017, 03:28 PM   #32
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Revisiting this for a moment: My parents had nothing when I was born. They worked hard, scrimped and saved and made certain that (with us also working and saving) us kids could get a good education. We appreciated it because it cost US as well as mom and dad. When time came for our kids to go to college, we did help, but made sure it was "hard" on the kids as well. They had to do their part. Buying into the process made them stronger and they also appreciated what they had when they were finished. What we have done to see that "they have more than we did" is to help with things like student loans and house down payments - once we have seen how hard they are willing to work for what they want. They have never asked for help, so we feel really good about offering it because we know what the effect is on their lives.

If I'm making a point, it is that I understand being "without" and how that affects us in relation to the next generation. BUT making it too easy on kids is no gift IMO. Let them struggle, help a little as you see them needing a little help. Then later, you can step in when they are old enough to appreciate it and also use it wisely.

If all this means that you pay a little more taxes in the mean time, so be it (heh, heh, Uncle Sam needs the money!) Sure, fund the 529s up to a point, but don't get carried away. Keep your "powder" dry for when they need it and go from there.

I rarely give this much specific advice. I never think I have enough experience or knowledge to do so. But in this case, I think I know "where you live" so to speak.

Still, this is a decision that only you can make and nothing anyone says is Gospel. You'll still be responsible (along with your kids) for the outcome(s). So eventually, you'll just have to go with your gut because YMMV.
That is great advice. Money to people who are not ready for it, is a curse. Look at lottery winners to see just how often that much money destroys peoples lives.

I look at it like the first "Last Man Standing", when his daughter asks for money for the mall, and he says that the 'starbucks' is hiring. She was like "OMG dad are we poor?" His answer... "Nope, your mom and I are doing great! You are poor!"

I've always told my kids that my wife and I plan to be spending that last penny as we keel over dead. They had to work their way through college with very little help from us. They have to work, and move out on their own, pay their own bills, buy their own car, their own insurance, etc etc. We help here and there but make sure its the right kind of help. But by them knowing they have to make it on their own, they are working harder and learning just how hard that is. When we finally do pass on, if there is something left, we hope to make sure its a blessing to them and not a curse.
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Old 06-16-2017, 03:45 PM   #33
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You can keep it but subject to income tax on growth and a 10% penalty if not used for eligible expenses.
I only had a small amount so I didn't know about the 10% penalty. But you only pay penalty on the earnings, plus you can designate another beneficiary to use the excess amount.

What Is the Penalty on an Unused 529 Plan?
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