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Gifting to adult children
Old 02-21-2021, 11:36 AM   #1
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Gifting to adult children

I want to gift money each year to my 30 year old son and daughter. Both are single. Both have good incomes. One is financially smart and responsible, the other- not so much. Both were taught well, one just valued the knowledge and applies it better.
One contributes fully to their Roth IRA as well as to their brokerage account and allows me to manage the account. The other tells me nothing. Not because Iím at all judgmental (only encouraging) but because they are likely embarrassed.
Anyway, to encourage savings I was trying to come up with a way to give them choices as far as my gifting was concerned. My thought was to offer them 100% match on any Roth IRA contributions they make. So they put in $3000, I match it with $3000. The other option is to choose a straight out $1500 gift, no requirements.
So they would be given the choice of doing nothing and with no oversight getting $1500, or saving $3000 and getting $3000 with some oversight. I suspect one would choose the higher value option and I have no idea what the other would choose. But if it was their choice and their sibling got more by doing more they couldnít claim preferential treatment or favoritism. Does this sound like a reasonable thing to offer?
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Old 02-21-2021, 11:47 AM   #2
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It doesn't have to be exact.

Suggestion: Kid #1 - I'd like to give you $1,500 to be put towards your Roth IRA. (Much as you would love Kid #1 to step up to the plate with a match, what if Kid #1 declines to do so?)

Kid #2 - you know that one is doing the IRA already; so just give it to Kid #2 to put into brokerage.
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Old 02-21-2021, 11:49 AM   #3
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It sounds like your kids are extreme opposites, and by that I mean your DD at 30 lets you "manage" her money and your DS shares nothing with you. And yes I remember you posting before about a very similar issues which why I know their pronouns.

A middle ground is what I would strive for in that you would let your DD start to manage her own money and talk to your DS and find out if he has a retirement savings vehicle.
If your son doesn't have retirement savings go simple and perhaps say I want to give you 1500 dollars to start funding this account and for your DD just give her the 1500 and outline your investment strategy encouraging to learn this for herself. Try this for the first year and then maybe talk about the matching aspect..

It's not so much about what is fair, it's your money until you give it away. What is your goal as far as giving away this money?
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Old 02-21-2021, 12:21 PM   #4
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It sounds like your kids are extreme opposites, and by that I mean your DD at 30 lets you "manage" her money and your DS shares nothing with you. And yes I remember you posting before about a very similar issues which why I know their pronouns.

A middle ground is what I would strive for in that you would let your DD start to manage her own money and talk to your DS and find out if he has a retirement savings vehicle.
If your son doesn't have retirement savings go simple and perhaps say I want to give you 1500 dollars to start funding this account and for your DD just give her the 1500 and outline your investment strategy encouraging to learn this for herself. Try this for the first year and then maybe talk about the matching aspect..


It's not so much about what is fair, it's your money until you give it away. What is your goal as far as giving away this money?
I think I asked a similar question about three years ago, so you have quite the memory. One child asked me to manage the account because they know how well-versed I am at financial planning and management. Who wouldnít take advantage of a free service like that? Oh, I know, a spendthrift sibling.

I donít want to be an enabler. I would prefer to give each of them the maximum amount allowable per year without having to file a gift tax return, $15,000 each. But I feel stuck because Iíd be 100% comfortable doing that for one and feel 100% foolish doing it for the other. So itís like the responsible one is losing out in my attempt to be fair.

What is my goal? To reduce my estate size so as to avoid having my estate pay estate taxes in the future. To encourage financial responsibility and behavior in my offspring and not drop a boatload of money into the hands of one who will not manage it wisely.

The most financially prudent thing to do would be leave everything to one child and give them oversight of what is left to the other. But that would not benefit their relationship no matter how well intended so is not a consideration. If the less responsible one can show me they are responsible it would benefit them greatly.
Iíve seen the damaging effects of rewarding irresponsible behavior and I wonít go that route.
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Old 02-21-2021, 12:27 PM   #5
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Joylush it doesn't have to be all or nothing...could you have a reasonable conversation with the one you consider spendthrift about your starting and funding a retirement account for them?

Offer to manage it like you are doing for his sister, what would happen if you did that.

You and your son have different ideas about money, that probably won't change. But having said that, you most likely have some common ground where you can meet in the middle.
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Old 02-21-2021, 12:39 PM   #6
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We have treated both our kids equally with gifting. One was always better at spending than saving, but over the years has done almost a 180.
Once we give it away, it is theirs to use as they need/want too. Bills, fun, savings, I don't care. I don't want to have control over their choices. They are adults.

Thankfully, addiction issues are not involved, as that may put a twist on decision making on our part.
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Old 02-21-2021, 01:05 PM   #7
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We have treated both our kids equally with gifting. One was always better at spending than saving, but over the years has done almost a 180.
Once we give it away, it is theirs to use as they need/want too. Bills, fun, savings, I don't care. I don't want to have control over their choices. They are adults.

Thankfully, addiction issues are not involved, as that may put a twist on decision making on our part.
That would be my goal as well. Itís just a bit scary.
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Old 02-21-2021, 01:12 PM   #8
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OP-- yes it was a leap of faith for the one who was a "spender". I had to bite my tongue many many times and take a deep breath.
However, I knew in my heart, that if I treated them differently, it would cause irreparable harm to both our relationship and the siblings relationships.
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Old 02-21-2021, 01:15 PM   #9
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I think I came here a year ago with a similar question. Fast forward 1 yr.


GS1' Roth has done very well and although he was involved with set up, finding investments, funding he calls it my Roth not his. So he did his own in 2020.

DS was always great with investments. Now he questions himself (I think losing almost everything in the divorce caused this). I gave him a Hanukkah check which he has not deposited. He just told me to invest it for him because he doesn't know what he's doing.

So you never know where they'll be next year!! This year: DD cash, DS Roth if he insists, GS1 zelle which is like cash .... of course he zelled me back when I split my stimulus check (that's not how it's supposed to work)
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Old 02-21-2021, 02:20 PM   #10
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I do not have a suggestion for how to provide an incentive but I did want to know, when did our kids become your kids? We must have attended the same parenting school?
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Old 02-21-2021, 02:55 PM   #11
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I do not have a suggestion for how to provide an incentive but I did want to know, when did our kids become your kids? We must have attended the same parenting school?
It’s frustrating. I feel for kids who weren’t taught well or who didn’t have good financial role models but this absolutely wasn’t the case for my two kids. Heck they even both had small businesses as children to teach them the entrepreneurial mindset (they both taught violin to younger students and started a neighborhood garbage can retrieval service). Both had Roth IRA accounts at age eight and had their own personal checking accounts then as well. They’ve literally been taught how to manage money since around age eight.

We also always had rental properties. So they know what makes a good renter and we’re taught how to maintain houses. First thing my son does after moving out on his own is to get a pit bull. of all the things not to get if you want to find a quality place to rent.

My son can’t fix a thing. We recently tried to instruct him how to change out a dryer cord. When asked if he had a socket set, he said, “A what?”

Whereas his sister was just just telling me how she reset the thermostat on her water heater after troubleshooting it. When I asked her how in the world she figured that out she said I remember you had that issue after a power outage at one of the rentals and you told me there was a reset button so I watched a YouTube video and found where it was located so I didn’t have to ask you where it was.

Both kids were exposed to the same things, at the same times being the same ages. I don’t get it either. But one takes after me and the other takes after their father, an incredibly smart, unhandy, high risk personality type.
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Old 02-21-2021, 03:00 PM   #12
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I donít want to be an enabler. I would prefer to give each of them the maximum amount allowable per year without having to file a gift tax return, $15,000 each. But I feel stuck because Iíd be 100% comfortable doing that for one and feel 100% foolish doing it for the other. So itís like the responsible one is losing out in my attempt to be fair.

What is my goal? To reduce my estate size so as to avoid having my estate pay estate taxes in the future. To encourage financial responsibility and behavior in my offspring and not drop a boatload of money into the hands of one who will not manage it wisely.
How about starting out with stating your goal of transferring estate money to them while your alive. Start with an offer to give them $6,000/yr to fund a ROTH IRA for their retirement provided that they send you a copy of the year end statement showing that the money is still within the ROTH account and has not been used to fund their current life style. If only one takes you up on the offer and the other doesn't that's fine. Of course, in my opinion you should just let your son make his own decisions on how he wants to invests the money and not worry about how well he manages it at this point. If he invests it in a CD paying 0.5% when he sends you the year end statement, just bite your tongue and send him next year's check.
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Old 02-21-2021, 03:02 PM   #13
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Great thread. Please give us an update in 10 years.

My heuristic would be "which one of you is going to take care of me when I need you to?"
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Old 02-21-2021, 03:21 PM   #14
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How about starting out with stating your goal of transferring estate money to them while your alive. Start with an offer to give them $6,000/yr to fund a ROTH IRA for their retirement provided that they send you a copy of the year end statement showing that the money is still within the ROTH account and has not been used to fund their current life style. If only one takes you up on the offer and the other doesn't that's fine. Of course, in my opinion you should just let your son make his own decisions on how he wants to invests the money and not worry about how well he manages it at this point. If he invests it in a CD paying 0.5% when he sends you the year end statement, just bite your tongue and send him next year's check.
Thatís a good idea. How he invests or spends his own money is not my business. But Iím just not into enabling him to recklessly waste my money. I donít want to be funding what I feel are poor choices. It would be worse than flushing the money down the toilet to me. And Iíve always been a big believer in the value of living with the consequences of your choices.

So often Iíve seen irresponsible children bailed out, supplemented and supported because they were needier due to bad decisions at the expense of the responsible child. Those children never learn to stand on their own two feet. I am just not that parent.
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Old 02-21-2021, 04:57 PM   #15
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Thatís a good idea. How he invests or spends his own money is not my business. But Iím just not into enabling him to recklessly waste my money. I donít want to be funding what I feel are poor choices. It would be worse than flushing the money down the toilet to me. And Iíve always been a big believer in the value of living with the consequences of your choices.

So often Iíve seen irresponsible children bailed out, supplemented and supported because they were needier due to bad decisions at the expense of the responsible child. Those children never learn to stand on their own two feet. I am just not that parent.

How your children handle money is fine to know while you are alive but are you going to leave them an inheritance? What do you think will happen then?


My step son and step daughter are in their 50s. We have given them both $14k/yr. for the past 3 years. It makes my wife happy that she can help them out while we are still alive. I love them both and it makes me happy too. We busted our keesters doing without and saving every penny while living a frugal lifestyle and would like to think they are using the money wisely and reducing their stress. They have both been told each time we gift that we might not have it next year but right now we are able to give. They don't know if they will be getting much of an inheritance but after seeing our life style over the years and modest home I'm sure they don't expect much. They will be surprised. I just hope they will be capable of managing it but there won't be much I can do about their priorities. If they waste it they know there won't be more in the future.



Cheers!
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Old 02-21-2021, 05:08 PM   #16
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Those children never learn to stand on their own two feet.
This frequently happens to children whose mothers manage their IRA's for them instead of teaching them to do it themselves and backing off.
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Old 02-21-2021, 05:09 PM   #17
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I treat my three kids equally as to gifting.

One has some very good financial acumen and skills, one ok with money but somewhat less skilled/knowledgeable at investing, the third not a spendthrift but also the worst at investing skills/knowledge.

So, I advised the two kids to check in for advice and investing ideas with the first one.

I don't know if they are taking my suggestion or not!
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Old 02-21-2021, 05:57 PM   #18
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This frequently happens to children whose mothers manage their IRA's for them instead of teaching them to do it themselves and backing off.
I would suggest an adult child who has amassed a large retirement savings and investment portfolio by age thirty has shown they know how to stand on their own two feet already. Seeking financial advice from a professional is often a wise choice- especially when itís free of charge and you know without a doubt your advisor is 100% invested in your best interest and success and not merely concerned with making a commission.

One of the wisest things you can do is find a mentor you admire and learn everything you can from them. Thatís my philosophy anyway.
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Old 02-21-2021, 06:08 PM   #19
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How your children handle money is fine to know while you are alive but are you going to leave them an inheritance? What do you think will happen then?
Cheers!
Presumably a substantial inheritance. What happens then is what scares me since statistics show 70% of Families Lose Their Wealth in the 2nd Generation. If managed correctly it could last for many generations to come.

So I donít know what will happen then. As it stands now I suspect half will be squandered and half will be preserved. But I wonít be around to see it. That sounds easier than having to witness it I guess.
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Old 02-21-2021, 06:17 PM   #20
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I would suggest an adult child who has amassed a large retirement savings and investment portfolio by age thirty has shown they know how to stand on their own two feet already. Seeking financial advice from a professional is often a wise choice- especially when it’s free of charge and you know without a doubt your advisor is 100% invested in your best interest and success and not merely concerned with making a commission.

One of the wisest things you can do is find a mentor you admire and learn everything you can from them. That’s my philosophy anyway.
But, but, but, you said
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One contributes fully to their Roth IRA as well as to their brokerage account and allows me to manage the account.
That's very different from what you are saying now. Your original words and tone really implied you are very controlling in the situation. If not, great. I just took you at your word that you were managing the account, not mentoring your daughter managing the account.

Letting go, in all its forms, is the toughest form of parenting..........
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