Kids - Giving while you're living

hankster · 03-25-2008, 11:02 AM

For the past several years, my parents have been giving me and my two brothers between $5k and $10k per year. They want to see us enjoy the money while they are still around as opposed to leaving a larger estate when they pass on. We would like to do this for our two kids as well. My brothers and I are old enough to do smart things with it like build our nest eggs for ER (oldest brother is already ER'd). Has anyone else here done this for their kids? If so, do you give in a certain way that helps to assure the money has a better chance of enriching their futures rather than being spent at the local boat dealer (examples: place the money in a Roth IRA in their name, in an ESA for grandchildren, or even in a separate account to help with a down payment on a home?) We want to encourage wise use of the funds without necessarily giving with some kind of strings attached.

73ss454 · 03-25-2008, 11:21 AM

What's the saying, better to give with warm hands and not cold ones.

TromboneAl · 03-25-2008, 11:32 AM

For me, I can't wait until my relationship with my daughter is no longer complicated by money (two college payments to go!). I can't wait to have no involvement in how her money is spent or not spent.

Moemg · 03-25-2008, 11:34 AM

Quote:

Originally Posted by TromboneAl

For me, I can't wait until my relationship with my daughter is no longer complicated by money (two college payments to go!). I can't wait to have no involvement in how her money is spent or not spent.

Al , Do you seriously think it will end so soon ?

brewer12345 · 03-25-2008, 11:34 AM

Quote:

Originally Posted by TromboneAl

For me, I can't wait until my relationship with my daughter is no longer complicated by money (two college payments to go!). I can't wait to have no involvement in how her money is spent or not spent.

Al, is there some equivalent of a mortgage burning party in your immediate future?

sarahsays · 03-25-2008, 11:39 AM

I'm a lucky enough to have parents able to gift me money. They're still in their mid-50s, dad's working (though he enjoys his job), mom is not.
My parents gave me the down payment for my condo and drew up a promissory note for the amount. Each year since, they are gifting me the money back (per gift rules) so that I don't have to pay them back.
I think it's the best thing they could've done for me right now and allows me to save for ER instead of a down payment.

73ss454 · 03-25-2008, 11:39 AM

Hey Al, an old friend of mine told me many years ago that when you have kids you'll never get to spike the football. The game is never over.

**ziggy29** · 03-25-2008, 11:47 AM

Quote:

Originally Posted by sarahsays

My parents gave me the down payment for my condo and drew up a promissory note for the amount. Each year since, they are gifting me the money back (per gift rules) so that I don't have to pay them back.

I'm not a tax pro, but it seems to me that if the IRS wanted to play hardball, they could assert that this was an "end around" to evade gift tax laws and that the original intent was clearly a "gift" above the combined $24,000 annual gift tax limit (from a married couple to one individual).

I'm not saying this is likely to be triggered, but it seems to me the IRS could construe it that way if they felt like it.

Any tax pros or anyone with experience want to weigh in on this one?

**REWahoo** · 03-25-2008, 11:49 AM

We choose to 'give our kids money' through setting up 529 plans for their children. I figure if they have to save less for their kids college expenses, they can focus more on saving for their retirement. So far only one seems inclined to do so, but that's her problem, not mine...

haha · 03-25-2008, 12:53 PM

Quote:

Originally Posted by Moemg

Al , Do you seriously think it will end so soon ?

Well, it can. And judging from what friends say, it will be a blessed relief when it does, just like Al is looking forward to.

All it takes is to respect your children as adults, realize that the parent is getting as much out of the purse-string relationship as the child, and get the heck out of this relationship-eroding situation.

When I graduated from HS my Dad gave me $10,000- a pretty good sum in those days. He made it clear that it should be used to set myself up to earn a living; and that there would be no more.

While I messed around some, lost some money speculating, and wound up having to work more and borrow more than I expected, overall it worked out.

Same with my own kids, except that they were both skilled programmers able to make their own living even while going to school, so there were no money transfers once they were out of the house. I could have made the younger son's life easier for him, and sped up his graduation, but I knew that when he showed up with a new $350 jacket or yet another snow board or $4000 bicycle I would have had trouble. I also knew that if I tried to interfere in his spending decisions I would be going down the unhappy road of so many parents that leads to stress on both parent and child, and also deforms relationships. Also, I realize that in many sports you get good while you are young or you don't get good- so I respected his choices. Nevertheless I would not have been able to finance them.

If I want my kids to hang out with me, which I do, I have to earn their affection and respect, just like you have to earn the affection and respect of your other peers.

On the other hand I have friends who have children that are still on the parental dole at age 30. Usually daughters. And some of these can have the unattractive habit of coming up with sponge-bob boyfriends who look to them not only for sex but also for financial support or financing for stupid ventures.

IMO, this really adds insult to injury for the parents. In their day, if any support was gained in a romantic relationship, it passed from the young man to the woman, not the other way around.

But there must be something in it for them, because they continue to pay.

Ha

OAG · 03-25-2008, 01:10 PM

I ditto haha. Could go on but it is nap time.

**Khan** · 03-25-2008, 01:43 PM

It goes on as long as you let it.

Quote:

Older Adults Living at Home With Parents - AOL Money & Finance

Kim Foss Erickson, a financial planner in Roseville, Calif., north of Sacramento, said she has never seen older children, even those in their 50s, depending so much on their parents as in the last six months.

TromboneAl · 03-25-2008, 03:23 PM

Quote:

Al , Do you seriously think it will end so soon ?

Quote:

Hey Al, an old friend of mine told me many years ago that when you have kids you'll never get to spike the football. The game is never over.

Yes, I'm quite sure it will end. (1) She's very independent and (2) I can't imagine any situation under which I'd give or loan any more money. That is, even if she had real money problems, I have no doubt that (a) she could pull herself out, and that (b) it would be better for her to pull herself out by herself.

Quote:

Al, is there some equivalent of a mortgage burning party in your immediate future?

Yes. For some reason, I look forward to that last check to the college more than I should. Partly because of this financial independence thing, and partly because saving and paying for college was such a big thing for over 19 years.

73ss454 · 03-25-2008, 03:28 PM

Hey Al, what about the wedding? Are you gonna go for that??

headingout · 03-25-2008, 03:33 PM

Interesting thread, thanks. I'm giving some thought to a "lump sum inheritance/college financing" plan for my son who goes to college next year. I see some benefits to our relationship with him, to our ability to define our remaining ER expenses, and to protecting him should we be sued or have medical problems. Any thoughts from others on how to structure something like this: I guess $24K/yr is the hard limit without Uncle getting involved? I want to keep it simple -- no trusts or lawyers, while giving him some safeguards from reckless spending if possible. If it weren't for the expenses, buying him some sort of annuity would be appealing. Maybe there is an investment that would pay back principle+interest over approximately 5 years but wouldn't allow early redemption?

TromboneAl · 03-25-2008, 03:43 PM

Quote:

Hey Al, what about the wedding? Are you gonna go for that??

Oh, shoot!

**REWahoo** · 03-25-2008, 03:53 PM

Quote:

Originally Posted by TromboneAl

Oh, shoot!

After footing the bill for two of them I'd say, it's more like "Oh $$,$$$hoot!"

Moemg · 03-25-2008, 05:29 PM

Quote:

Originally Posted by Moemg

Al , Do you seriously think it will end so soon ?

Yep, Al there is the wedding and the grandchildren so do not burn that check book yet . As they say It's not over until the fat lady sings !

laurence · 03-25-2008, 07:27 PM

Quote:

Originally Posted by TromboneAl

Oh, shoot!

I paid rent in college when living with Dad, my Mom paid first two years tuition for college, gave me $2k to help when we were scraping up a down payment on a house, and DW's parents gave us an unfinished desk and bookcase when we got married. That's the extent of the financial transactions in our collective adult life with our parents. Did we have some student loands to pay? Definitely. But between that, paying for the marriage ourselves, etc. we are much better off for it. We have friends who's parents helped them out enormously for many years. Same age, similar income. They are ~20-30k in debt (won't say exactly) and renting. We own our home and are north of a quarter mil in the black.

macdaddy · 03-25-2008, 08:29 PM

I think it depends on the child. My parents gave me enough money that I felt I could take some risks after school and didn't have to jump immediately in to a job/career track. As a result, I teamed up with some buddies and started a company, survived lean times for a year, and made 30 times more than I could have made at a traditional job. I jokingly refer to the money my parents gave me as their "long term care insurance" because I would gladly return the favor (time or money) to them if they needed it in the future. That said, I have friends who inherited trust funds who flushed the money down the toilet and were far worse off for the experience.

03-25-2008, 11:02 AM	#1
hankster Recycles dryer sheets Join Date: Jan 2008 Posts: 248	Kids - Giving while you're living For the past several years, my parents have been giving me and my two brothers between $5k and $10k per year. They want to see us enjoy the money while they are still around as opposed to leaving a larger estate when they pass on. We would like to do this for our two kids as well. My brothers and I are old enough to do smart things with it like build our nest eggs for ER (oldest brother is already ER'd). Has anyone else here done this for their kids? If so, do you give in a certain way that helps to assure the money has a better chance of enriching their futures rather than being spent at the local boat dealer (examples: place the money in a Roth IRA in their name, in an ESA for grandchildren, or even in a separate account to help with a down payment on a home?) We want to encourage wise use of the funds without necessarily giving with some kind of strings attached. __________________ "There is no dignity quite so impressive, and no independence quite so important, as living within your means." Calvin Coolidge

03-25-2008, 11:32 AM	#3
TromboneAl Thinks s/he gets paid by the post Join Date: Jun 2006 Posts: 4,166	For me, I can't wait until my relationship with my daughter is no longer complicated by money (two college payments to go!). I can't wait to have no involvement in how her money is spent or not spent. __________________ - Al -- Always serious, never joking. No, wait. Never serious... Always... I forget.

03-25-2008, 11:49 AM	#9
REWahoo Administrator Join Date: Jun 2002 Location: Texas Hill Country Posts: 11,616	We choose to 'give our kids money' through setting up 529 plans for their children. I figure if they have to save less for their kids college expenses, they can focus more on saving for their retirement. So far only one seems inclined to do so, but that's her problem, not mine... __________________ [Closed for renovation]

03-25-2008, 01:10 PM	#11
OAG Thinks s/he gets paid by the post Join Date: Jun 2006 Location: Dublin, Ohio Posts: 1,824	I ditto haha. Could go on but it is nap time. __________________ Proud Vietnam Veteran: Cu Chi 66, 1/25th, HHC 25th and Pleiku 66-67 41st Sig Bn 1st STRATCOM

03-25-2008, 11:21 AM	#2
73ss454 Thinks s/he gets paid by the post Join Date: Oct 2004 Posts: 1,758	What's the saying, better to give with warm hands and not cold ones.

03-25-2008, 11:39 AM	#6
sarahsays Recycles dryer sheets Join Date: Mar 2008 Location: Washington, DC Posts: 75	I'm a lucky enough to have parents able to gift me money. They're still in their mid-50s, dad's working (though he enjoys his job), mom is not. My parents gave me the down payment for my condo and drew up a promissory note for the amount. Each year since, they are gifting me the money back (per gift rules) so that I don't have to pay them back. I think it's the best thing they could've done for me right now and allows me to save for ER instead of a down payment.

03-25-2008, 03:28 PM	#14
73ss454 Thinks s/he gets paid by the post Join Date: Oct 2004 Posts: 1,758	Hey Al, what about the wedding? Are you gonna go for that??

03-25-2008, 03:33 PM	#15
headingout Recycles dryer sheets Join Date: Feb 2008 Posts: 80	Interesting thread, thanks. I'm giving some thought to a "lump sum inheritance/college financing" plan for my son who goes to college next year. I see some benefits to our relationship with him, to our ability to define our remaining ER expenses, and to protecting him should we be sued or have medical problems. Any thoughts from others on how to structure something like this: I guess $24K/yr is the hard limit without Uncle getting involved? I want to keep it simple -- no trusts or lawyers, while giving him some safeguards from reckless spending if possible. If it weren't for the expenses, buying him some sort of annuity would be appealing. Maybe there is an investment that would pay back principle+interest over approximately 5 years but wouldn't allow early redemption?

03-25-2008, 08:29 PM	#20
macdaddy Recycles dryer sheets Join Date: Feb 2006 Posts: 403	I think it depends on the child. My parents gave me enough money that I felt I could take some risks after school and didn't have to jump immediately in to a job/career track. As a result, I teamed up with some buddies and started a company, survived lean times for a year, and made 30 times more than I could have made at a traditional job. I jokingly refer to the money my parents gave me as their "long term care insurance" because I would gladly return the favor (time or money) to them if they needed it in the future. That said, I have friends who inherited trust funds who flushed the money down the toilet and were far worse off for the experience.