How to pass on the nest-egg

[Martha]

Quote:

Originally Posted by CCdaCE Yeah, contributing to your child's RothIRA was going to be my suggestion too. I don't know if that is included in the $12k/year limit? Max. to give 'em is $12k + $4k into their Roth? How would anyone ever know? I guess that way, you can be more sure they'll use it for their retirement, but on the other hand, there's nothing preventing them from cashin' it out and taking the penalty hit. -CC

The 12,000 exemption includes any money put into a Roth. It doesn't include medical or educational expenses paid directly to the provider.

[Nords]

Quote:

Originally Posted by Martha The 12,000 exemption includes any money put into a Roth.

I would've thought that the Roth was earned income and the $12K gift was unearned income... two mutually-exclusive types of income.

[donheff]

Quote:

Originally Posted by Nords I would've thought that the Roth was earned income and the $12K gift was unearned income... two mutually-exclusive types of income.

I think in the OPs case you are right since they paid their kid for work done in the business. Any of that money that went into the Roth would be the kid's earned income. But other posters suggested that if you kid works for others you can pay the equivalent amount into a Roth while the kid retains all the earnings (I did that for DD last year). That equivalent was a gift from me to her.

[kaudrey]

We lionize individuals who pull the plug at an early age. Doesn't it make sense to help our kids achieve same?

-----

Well, my parents retired early. I plan to retire early, without any of their money. I hope they die broke and happy many, many years from now.

But...they DID help me. More than I'll ever be able to thank them for. They showed me by example that a middle-class, single-income family with 2 kids can LBTM, save their money, enjoy life (they even built us a pool!), and retire at 57.

My parents are now 70, and yes, they plan to leave my sister and I whatever they have left. But I plan to retire before that happens and without factoring any inheritance into the equation. My sister and I both LBOM and save plenty of money because that's what we grew up with. I will probably donate much of anything I get from my parents.

Helping your kids to ER doesn't have to be monetary.

[cute fuzzy bunny]

Our gift to gabe is to try and not become a burden on him when we're older. Financially or otherwise.

Past that, he'll get a car, a college education, and i'll help him buy a house or start a business if the time is right and the opportunities look good. Then when we pass on and he's in his 40's and his life is largely set, he can have the rest. I imagine the options for passing the money along tax-smartly between now and 2050 will be variable and interesting...

[FinanceDude]

Quote:

Originally Posted by Cute Fuzzy Bunny Our gift to gabe is to try and not become a burden on him when we're older. Financially or otherwise. Past that, he'll get a car, a college education, and i'll help him buy a house or start a business if the time is right and the opportunities look good. Then when we pass on and he's in his 40's and his life is largely set, he can have the rest. I imagine the options for passing the money along tax-smartly between now and 2050 will be variable and interesting...

Good plan.......... BTW, CFB, isn't your sig an example of the "circular reasoning" I use so often with DW

[WM]

My parents (late 50's) have always LBYM and will likely have enough for a long retirement and some left over. They have helped my sister and I each buy homes (partial loan for downpayments) and are gifting money to my sister to fund a Roth, as some others have suggested.

Having been raised by LBYMers, my sister and I are both a little reluctant to accept financial help from them, as we feel we should be doing things for ourselves. Hence the loans for the downpayments, rather than making it a gift (mine was paid back within a couple years and sis is making payments as agreed).

My parents also worry a little about whether giving money to my sister for her Roth encourages her not to save her own money, and she in turn feels slightly guilty for accepting the money, especially since DH and I haven't needed similar help. Neither of these is a serious problem, but it is a reminder of the baggage that can come with generous gifts. I think being able to talk about these issues is really important so that both parents and kids can feel good about it.

[kcowan]

Quote:

Originally Posted by donheff That would certainly be a pleasure. If Moore's law's impact affects bio-tech, nano, and quantum computing and the market just goes up, up, and away, we will do the same.

The idea of making a difference was stimulated by Bill Gates and then Buffett. Even though we are in a different league, the principles are the same. Plus I think it would be fun to pass on the idea of managing money for the benefit of someone more needy. I was the beneficiary of a Ford Foundation Fellowship when I needed the money. Giving back has been a huge legacy of a couple of fellow alumni: founding CEO of Celestica and also a cofounder of eBay. They set new records for the size of contributions. We are not in that league but every little helps!

[wabmester]

I set up a charitable trust with the remainder going to my school, but I'm having second thoughts about the beneficiary precisely because their coffers are so full.

I may leave it to the school (by default), but there are probably many who need the money more than they do.

[Sandy]

As I thnk about this, it seems to me that the "kids" ages and the life style choices may inflence the decision of many. If the kids have been responsible then gifting for certain assistance might make sense when you are able. If they don't inherit until 40's or 50's then leaving a pile to faciliate ER is also a different. From the other side, gifting or leaving a pile to a a drug-addicted or spendthrift 20-something is a nother matter. the reverse could also occur, with a responsible 20-something who loses it in a mid life crisis.

So it seems that some of the decision will likely be based on what we think will be good for them, at the time we expect the gift/transfer to occur. It also means that this decision could change over the years as children reach different ages and may (or may not) change living habits.