Balancing an advance on kids' inheritance

[SecondCor521]

Thanks for the suggestions, but this is probably not going to fly with us being in Spain, DS in France, and DD in the UK.

Maybe so. All of my kids are US citizens living in the US, so all of us can have brokerage accounts at the typical Vanguard/Fidelity/Schwab, which allows me to do the in kind transfers mentioned.

I know other countries have far different rules that may make my suggestion non-workable.

 

[2017ish]

After unfortunate life occurrences, we wrote off the 110K that we lent one child for a strong law school degree. (Technically, we gave it as a gift to he and his then wife in December of one year and January of the next.)

To smooth the tax burden, we gave the same amount to the other two kids over the course of the next three years. Like most, we wanted to keep things even--even though for one kid and spouse it was a meaningful amount, and for another couple it was a month's income. (For the one with the loan, it was life changing...)

We didn't change the wills or beneficiary designations, but put it in writing to all of the kids. We figured that the odds of both of us dying before reaching age 63 was low; but....

 

[ivinsfan]

Even though we keep things even on an annual basis, I don't think I care to worry about what they invest (or spend) it on. If one gets 20K and puts as a down payment on a house that goes up, well... then good for them. If the other kids blow the money...such is life. I can't control possible gains/losses after the fact. But, having said that, I see your point in that the kid that didn't get the 200K could be way behind many years later.

FIL gave SIL money monthly over 20 years - because she was poor (she was). We made it even after his death, but didn't try to take into account inflation. I guess we could have, but SIL wouldn't have understood and would have been mad.

Just pointing out how things get complicated.......and the idea of treating all kids equally can get complicated.

 

[ncbill]

$XXX to each kid as house downpayment.

Nothing else until we're dead.

As long as we're alive they will always have a bedroom available should life go that badly for them.

But our plan is to move in with one of them (or to an ADU on their property) later in life.

 

[MichaelB]

This was our thought initially. But DS really didn't (still doesn't) need $200k, and the capital gains tax hit just to balance things out would have felt like a high price for "evenness".

Can you open revocable trust in your name, move the $230k into that account, and make the beneficiary your son? The remainder of your estate could still be divided equally among your children when needed.

If not a trust, can you have a separate account with segregated funds, still in your name, your son the only beneficiary?

 

[brett]

We paid for our son's university education and a good portion of his post graduate tuition.

Our daughter attended a local community college. We paid her way.

Both were told that we would pay for their post secondary education.

One was much more money than the other. We feel no obligation whatsoever to 'even' this up nor does either child expect us to do so.

Why on earth would we?

I believe that this notion of treating them exactly the same from a monetary perspective can be taken to extremes.

 

[UpQuark]

My parents gave my brother an amount and bought a life insurance policy to be paid to me for the same amount. There were more than 20 years between when my brother received his amount and when I got the same amount from the life insurance.

I never even thought about the effect of inflation, but I'm glad to be thinking about it because of this thread, because I'd felt bad that I got so much more after our parents died than he did.

I'm sure my brother put his portion to profitable use because he bought a business. I didn't know until going through old boxes of legal paperwork after they died, but the money my parents gave my brother was structured somehow as a business loan and he was paying them 12% interest per year for their lifetimes. Hopefully the business used that as a tax deduction, otherwise I would feel really really guilty about getting the life insurance money.

 

[Stormy Kromer]

We paid for our son's university education and a good portion of his post graduate tuition.

Our daughter attended a local community college. We paid her way.

Both were told that we would pay for their post secondary education.

One was much more money than the other. We feel no obligation whatsoever to 'even' this up nor does either child expect us to do so.

Why on earth would we?

I believe that this notion of treating them exactly the same from a monetary perspective can be taken to extremes.

Have you been on the receiving end of this thought ?

 

[iloveyoga]

Depends on how it's done and how much people know about the tax laws.

If one inherits money and then gives part of it to a sibling, then that gift is subject to gift tax rules. See https://www.irs.gov/businesses/smal...oyed/frequently-asked-questions-on-gift-taxes.

If one is pending an inheritance and chooses to disclaim, it's possible that the disclaimed amount might go to the sibling. There are rules here too. But in this case there would be no gift tax because it was never your property to give away in the first place, it was just about to be yours.

Thanks, so a little bit complicated.

 

[PatrickA5]

We paid for our son's university education and a good portion of his post graduate tuition.

Our daughter attended a local community college. We paid her way.

Both were told that we would pay for their post secondary education.

One was much more money than the other. We feel no obligation whatsoever to 'even' this up nor does either child expect us to do so.

Why on earth would we?

I believe that this notion of treating them exactly the same from a monetary perspective can be taken to extremes.

We didn't try to even things up on undergraduate degrees. Oldest daughter and youngest son both went full time and cost us a bunch. Middle daughter went to community college and dropped out once done with that. She knows that we'll finish paying for college if she wants to go back, but with 3 kids and working I doubt that's going to happen.

Having said that, when I paid off oldest daughters student loans for her Masters, we did even things up with the other kids. We were already thinking about making some gifts and asked oldest daughter if she wanted out of her student loans instead of getting cash.

 

[Jerry1]

Can you open revocable trust in your name, move the $230k into that account, and make the beneficiary your son? The remainder of your estate could still be divided equally among your children when needed.

If not a trust, can you have a separate account with segregated funds, still in your name, your son the only beneficiary?

This is what I was thinking. Segregate the money somehow to lock it up in today’s dollars. No matter how it does compared to inflation, on this day, you gifted equal amounts. I might give DS some input on how the segregated funds are invested.

 

[Texas Proud]

I am on board with the people who say give it to both now...


You recognize that money today is more valuable than money in the future but have no way of knowing how much and when the 2nd gift will happen... so plan on giving both the same amount at the same time... let them decide what they want to do with the money... one buys a house and the other invests... or blows it gambling... who cars as it is theirs now..


One of my sisters did this recently with her kids... both actually invested in a house... the 2nd only did so when she knew the money was coming...

 

[brett]

Have you been on the receiving end of this thought ?

If you mean was I concerned that my parents gave my sister much more than me in their lifetime the answer would be no. She needed it, I did not. When they passed we split the estate 50/50.

I certainly did not feel any sense of entitlement or believe that I should have been given an equal amount...either before their death or after. It never entered my mind. It surprises me somewhat that people are so focused on evening it right down to the dollar. Life is just not like that.

 

[BigNick]

Can you open revocable trust in your name, move the $230k into that account, and make the beneficiary your son? The remainder of your estate could still be divided equally among your children when needed.

If not a trust, can you have a separate account with segregated funds, still in your name, your son the only beneficiary?

I'm not sure what a revocable trust is, but this is basically what we did with DW's life policy. It is about $30k short (so would need DD to give DS $15k), but everyone involved trusts each other.

When my own parents died I was so glad that I could trust my own sister to execute the will, as I was living in another country. We have never been very "close" because she is nearly 8 years older than me and left home when I was 8, but we have always got on fine.

 

[WhenIsItTime]

An unintended consequence of gifting too much, too soon and for too long, can create the potential for a less than motivated kid.

We run the risk of this, but are at early days. Gonna give it a go anyway. I'd much rather have the bulk of my nest egg stay in the family tree than give it away to charity or in taxes. I accept the challenge of keeping them humble and responsible. I also believe in giving when most useful as opposed to timing it to my death.

 

[rodi]

The way my dad did it was he loaned me money for the down payment with caveats in the loan document that if I had divorced the my (still ) husband would not get the home equity of the loan value. The loan was repayable on dad's death.

So my portion of the inheritance was reduced by the zero interest loan.

 

[Chuckanut]

I also believe in giving when most useful as opposed to timing it to my death.

+1

 

[WhenIsItTime]

$XXX to each kid as house downpayment.

Nothing else until we're dead.

As long as we're alive they will always have a bedroom available should life go that badly for them.

But our plan is to move in with one of them (or to an ADU on their property) later in life.

Sorry if I comment in jest, but kind of funny "nothing else until we're dead" followed by "our plan is to move in with one of them". Seems you are holding some leverage.

 

[indiajust]

I have gotten more comfy with regular payments. In your shoes, I might forgive 15k a year for the one you gave money to, and give 15k a year to the other. Just keep going.

 

[samcat]

This one sure hits home. My dad was going to give my brother dollars to help him buy a home and called me to talk to me about it. Though I was totally okay with it, I missed the part of "advance on his inheritance" and told him if it was a loan, he needed to charge interest. He never corrected me. Three days later, I called to find out how it all went down and the amount and he said he was giving him $200k. I lost it as I didn't know he was giving it to him. Argh. $200k was 25% of my parents liquid net worth. They were 85 at the time. I told him I didn't think he could afford it and he decided to give him $100k and loan him the rest if he needed it. My dad told my brother that I didn't think they could afford it and I did not hear one word from my brother asking me why I thought that (I live near my parents, my brother lives far away so I have more insight into what is going on). I'm sure people will roast me on here because it is not my money but you need to understand that my parents have never given us money. Never. They are now 87 and need every penny they have because my mom has dementia and will probably need to move into a care facility next year.

Dad offered me $100k and I told him no. He needs to keep everything he has. If they run out of money, I hope my brother knows that he is going to have to provide the first $100k!

 

[Joylush]

I 100% agree with trying to keep things equal. I’m in a position of wanting and needing to give money away now. I tend to reward the responsible one and am hesitant to give equally to the irresponsible one now because it enables more irresponsibility. It would be like flushing money down the toilet.

So my mindset is changing. I’m more inclined to just reward the responsible one and let the irresponsible one figure it out and pray one day he learns from the repeated mistakes.

 

[Music Lover]

This one sure hits home. My dad was going to give my brother dollars to help him buy a home and called me to talk to me about it. Though I was totally okay with it, I missed the part of "advance on his inheritance" and told him if it was a loan, he needed to charge interest. He never corrected me. Three days later, I called to find out how it all went down and the amount and he said he was giving him $200k. I lost it as I didn't know he was giving it to him. Argh. $200k was 25% of my parents liquid net worth. They were 85 at the time. I told him I didn't think he could afford it and he decided to give him $100k and loan him the rest if he needed it. My dad told my brother that I didn't think they could afford it and I did not hear one word from my brother asking me why I thought that (I live near my parents, my brother lives far away so I have more insight into what is going on). I'm sure people will roast me on here because it is not my money but you need to understand that my parents have never given us money. Never. They are now 87 and need every penny they have because my mom has dementia and will probably need to move into a care facility next year.

Dad offered me $100k and I told him no. He needs to keep everything he has. If they run out of money, I hope my brother knows that he is going to have to provide the first $100k!

Take the $100k and put it aside for when/if your parents need it. If they don't need it you're "even" with your brother. Also, with dementia you can't be sure that they won't give your brother another $100k at some point. Then you're $200k behind.

 

[samcat]

Take the $100k and put it aside for when/if your parents need it. If they don't need it you're "even" with your brother. Also, with dementia you can't be sure that they won't give your brother another $100k at some point. Then you're $200k behind.

Thanks for your comment! My dad is in control of the finances and his mind is still good but I'll keep that in mind for the future. They also have an advisor who I should probably call just to say if anything seems out of the ordinary, please let me know.

Something else happened. My mom spent a month in rehab for broken bones (plus a month with 24 hour care at home). My dad would stay with her for 8 hours a day and me four hours. It was so difficult. Our son also got married during this time. My dad asked my brother to fly home to help while I was gone for the wedding and he said no - it was too far. I missed out on income, vacation time, a happy wedding (which was happy but not when my parents called two hours before the rehearsal dinner and I had to talk them down from arguing about her getting out of bed by herself). After this period was over, I told my dad I wanted to be paid $10k for dealing with all of this. I read a Facebook post that said that if all siblings participate in events like this then everything is fair. If not all participate, then the ones that do should be compensated. I told my dad all of this and he said yes.

Of course, I don't want it now because they need to keep their money but maybe I will rethink all of this and take it and put it in a special account or have their financial advisor split off $110k into an account earmarked for me. Dad actually insisted on giving me the $10k now because it won't be worth $10k in the future but I really don't care about that. Just want my brother to know that I'm getting extra because I was here. My therapist says I need to get beyond thinking about what my brother thinks!

 

[Texas Proud]

When taking care of parents or parents it is never 'fair'...


My oldest sister and me (the youngest) lived very close to mom as we moved her here close to us... I did the most for her and my sister did about half as much... but the 4 other siblings thing they did 'just as much'...


I did not get compensated for doing it... but I did charge 'retail' for doing her estate so did not give them a break on that... it did not come close to the amount of work I did the last 10 to 15 years but I did not care as it was my mom... whereas the estate was not for my mom...

 

[rayvt]

We knew when one of our siblings got money from our parents when we unexpectedly got a check from them out of the blue.

You should give your kids the same amount of money at the same time. If one doesn't need the money, then deposit it in a brokerage account in their name, in a S&P500 index fund.