Gifting to Children

[brett]

We are funding our grandchildren's post secondary education. Or part of it. Essentially a sheltered fund 2.5K per child per year sheltered from birth until age 16. that grows fax free and has a gov't component grant of 500 per year.

Since the grandchildren are young we also have an amount off the top of our estate that goes into an edu trust fund for each child. This may change as they get older.

Daughter has 3 children. Son none...but that could easily change.

We view these gifts, as do our children, as completely different and separate. Nothing to do whatsoever with how we divide the remaining balances between our two children. Should our son have no children we are not going to make an adjustment in his favor in our estate to represent the investment in our daughter's children.

When it comes to estate, we do not view being even as having to be confined to a year by year event. We have no gift tax in our jurisdiction. Last year we gifted our daughter 85K towards a capital investment. Nothing to my son. But he may need that much or more next year, the year after. We do keep a log of those amounts in order to even things out at the end. But certainly not year by year. We do not view needs or gifting to be bound by calendar years.

We paid for both of our children's post secondary education. Our son's edu expenses were much higher than our daughters. Partly because of grad school. Did we feel in any way obligated to gift our daughter money because we spent less on her? NO. She had the same offer and was able to make with it what she choose. Certainly no resentment from either child.

 

[Winemaker]

DM and DF divided their assets equally amongst 4, per stirpes. At the time the will was made, I was married and had 2 kids, a sibling was on her second marriage and had one child and another on the way, and the other 2 were unmarried. The situation remains the same 20 years later.

 

[misanman]

We have funded 529s for the 10 grands and that affects the three families somewhat unequally but since it's equal for each grand it's not a problem. Also gifted one son for a home purchase but then adjusted our will so that his share of inheritance will be reduced to compensate.

 

[target2019]

We were discussing gifting our children. It is meant to be some extra cash just to have on hand for whatever they would like to do.

We are in agreement with gifting but not necessarily the amount. Our DS is married with 2 young kids. Our daughter is single. Our will provides a 50/50 split.

We were discussing a 50/50 gift. Or, a 50/50 gift, plus a gift for the grandchildren, for their future education. That feels to one of us as if we are providing a larger gift to DS, even if it is directed at the grandchildren. DS could make the choice of directing his gift money to his children, if he so chooses. There are no strings attached to any of the gifting.

For the Ethicists out there, can you provide your thoughts of what is fair? This is an anal question is fair response.

We had this discussion with father-in-law. As for the will, it was divided 4 ways since their were 4 children. At one time he had a complicated wish to cover grand children and great grand children. The problem is that would severely penalize his single child. So he agreed to divide by 4, and keep the will simple.

For gifts once a year it is of course something for you to decide. In the case above, we helped him each year with the holiday list and decided how much to gift children, grandchildren, etc. After that was done he wrote another check to his single daughter to balance things out.

What I learned from this was that there are different views on how many children, no children, life-style, etc. Now that the in-laws have passed, we follow a similar giving model, and divide by 2. YMMV.

 

[donheff]

Fair? How about a Marxist approach: to each according to his/her needs? Really, what are you trying to achieve? I approach it somewhat like Youbet: close to 50/50 to the kids (down payments on their houses) but equal 529 investments for each grandkid. But there are a lot of circumstances that might merit significant differences. Special needs kids or grandkids being an obvious example.

 

[Car-Guy]

I think I'd setup account(s) for the kids separately and keep it under your control. Tell your son so he'd know about it but without giving him access to the funds. Oh, and if you want to give more than 16k a year to each it's no big deal until you start getting around 12m in your lifetime. Just file form 709..

 

[Stormy Kromer]

You asked the question, here's an example for you.

When my grandma was older she wanted her will split evenly among her 4 children, after giving each grandchild $1,000. Her 4 children had from 1 to 5 children each.

Her attorney told her to give each of the 4 children their even split and tell them its your wish that each grandchild receive $1,000 of their share. Nothing in writing.

This wasn't a large estate and she was in a nursing home and nobody thought there would be anything left. There wasn't.

The OP mentions one child doesn't have children. Is there a possibility that they may in the future ?

If it were me, I would give each an equal percentage. That's just me. I would still be generous to the grandchildren, but not at the same time.

 

[Badger]

When my parents passed away the inheritance was to divide equally between the 3 of us. Older brother had 3 grown children, sister had 2 grown children, and I had 2 grown step-children. My parents had always gifted equally as we were children growing up and continued that in their trust. My brother thought he should either get more or each of his children and grandchildren should be included in the inheritance. My sister and I agreed with our parents who felt it should go to the 3 of us and any children were our responsibility.
My wife and I now gift to each of our 2 grown children $14k each year while the grandchildren and greatgrand children receive small gifts on birthdays and Christmas. If our children want to use some (and they do) to give to their children that is their prerogative.

Seems fair to me.


Cheers!

 

[Dash man]

We have two sons, both married, one with twins and the other with one child. We’ve set up 529s and custodial accounts for each of the grandkids. We gift money each year to the boys and their wives. They also live in townhomes we own rent free and will eventually gift to them.
We also have opened 529 accounts for the two kids of a nephew that passed away.
Our trusts divide everything equally between the boys with a little going to siblings and our church.
If anyone told us we weren’t fair, we’d explain it’s our money and our choice. If the challenge us a second time, they won’t be happy. Our trust specifically excludes anyone who challenges our decisions.

 

[street]

The lifetime gift tax exemption IRS Form 709 is an option also, for gifting in excess of $16K.

 

[JDARNELL]

Life is not about fairness its about efficiency. Having said that with our two boys we do think about being fair but recognize they have different capabilities. For example the oldest son is happy just bopping along and while the youngest is a little more go getter. We have thought about generational wealth maybe past a future grandchild but have kind of dialed back that thought process. We will split assets between the kids and pay for any grandchild's education.

Current gifts are into Roth IRAs and eventually will end once spouses enter the picture. Not to be mean but to give the kids time to develop their relationships with their spouse on the financial frontier. We don't want to take away all those opportunities to work as a team and communicate.

We are assisting first son as he is getting launched by providing a little monthly economic outpatient care to help with a nicer place to live. (disclaimer: this was more for me as I knew if mama wasn't happy then no one was gonna be happy and my quality of sleep was gonna go down if she was worried he was in a bad area). #2 son will get the same consideration if needed. If not needed I am sure he will get what he needs in some other way.

 

[brett]

My parents helped my sister financially over a number of year. I did not need any financial help.

When they passed, their estate was split equally with no regard to prior financial help. Neither of us thought about it for a second. It simply would not of occurred to me that perhaps I should get more than half because of this.

I do not think that loving your children or loving your parents is about money or equal shares. It has more to do with needs than wants. It surprises me people can become so anal over money shares. Usually money that is not theirs and they did not earn. I put it down to a false sense of entitlement.

 

[retire48in2018]

It’s a gift.

IMO - anyone who tries to decide other than the giver what is “right” is wrong

There is no entitlement to a gift - practically by definition.

Sometimes circumstances can let others see reasons behind not splitting evenly - for example - kids have widely different income, paid private college for one vs other, kids, etc. sometimes it’s behavior - one might use it for drugs, etc

In older times, oldest child received a double portion, etc

I think anyone “expecting”, demanding or justifying what one generation does with their wealth upon passing is wrong.

They can do what they want, however they want.

The spouses should agree between themselves on what they are doing. It’s no one else’s business.

In my family - my siblings got cars, occasionally money, furniture and other things from parents where they have given me nothing. I do not think badly - my parents did what they felt was needed or wanted to do.

 

[brett]

It’s a gift.

IMO - anyone who tries to decide other than the giver what is “right” is wrong

There is no entitlement to a gift - practically by definition.

Sometimes circumstances can let others see reasons behind not splitting evenly - for example - kids have widely different income, paid private college for one vs other, kids, etc. sometimes it’s behavior - one might use it for drugs, etc

In older times, oldest child received a double portion, etc

I think anyone “expecting”, demanding or justifying what one generation does with their wealth upon passing is wrong.

They can do what they want, however they want.

The spouses should agree between themselves on what they are doing. It’s no one else’s business.

In my family - my siblings got cars, occasionally money, furniture and other things from parents where they have given me nothing. I do not think badly - my parents did what they felt was needed or wanted to do.

Exact same with my parents and we are the same. Don't understand the angst about ensuring that everything is equal from a dollar perspective. Is it caused by the parents or by the children?

 

[target2019]

Each situation is different. The OP and spouse have a difference of opinion that will be reconciled.

In another case the giver may be reaching a very difficult stage in life, with mounting bills for a spouse in care for dementia. His/her decisions are not being made with the same clarity of thought as 10 years previous.

Someone else may have one child that does not fit the mold.

Every situation is different and people who ask or comment deserve respect for their opinions or plans.

 

[savory]

Thanks to all. This was very helpful for me.

 

[Sunset]

No matter what is done, it can always be considered not fair.



I certainly experienced the unfairness of how I worked hard, saved hard, didn't waste my money, etc so people viewed me as somewhat successful.



My Sister, blew her money and only took a job if it was easy, was fine to live on gov't handouts at times.


So relatives helped out my Sister a bunch over the years with a lot of money, free new car, etc. Me I once got nothing..



So I'm sensitive to rewarding bad/poor behavior/choices while screwing over the child that is delaying gratification, working hard, etc.



I give equal gifts to the kids, as I'm not going to punish/deny one of them a gift because they are working harder or plan better. If the poor child wants more, they can do better on their own.



Neither child is handicapped which would be a different situation.

 

[youbet]

This is true as well. I was simply replying to the statement that any gift more than $16k had tax implications. A married couple can give twice as much without having to deal with any gift tax implications, filings, etc.

I think it's not just married couples...... Can't any two people give twice as much (without tax implications) as one person?

Perhaps I'm missing something.......

 

[RockyMtn]

I think it's not just married couples...... Can't any two people give twice as much (without tax implications) as one person?

Perhaps I'm missing something.......

You are correct. I read the OP as being married which is why I referenced a married couple.

 

[pacergal]

Fair is not always Equal.

That being said, our estate is set up 50/50 to our two kids. Hopefully, they will use it to fund their own retirement and help their kids, at that time it will be their money, their choice. I am not ruling from the grave.
If we gift cash, such as at Christmas, we give equal amounts to DD and DS.
They both know we have also helped them personally and their sibling with other financial issues when they arose, as we could. Be it grad school, medical bills, house down payment, etc.Those may not be exact equal, but overall, it is fair, as the help was given when they each had a need.
They always say they would rather we spend it on ourselves and have never asked for money directly.

 

[Koolau]

We were discussing gifting our children. It is meant to be some extra cash just to have on hand for whatever they would like to do.

We are in agreement with gifting but not necessarily the amount. Our DS is married with 2 young kids. Our daughter is single. Our will provides a 50/50 split.

We were discussing a 50/50 gift. Or, a 50/50 gift, plus a gift for the grandchildren, for their future education. That feels to one of us as if we are providing a larger gift to DS, even if it is directed at the grandchildren. DS could make the choice of directing his gift money to his children, if he so chooses. There are no strings attached to any of the gifting.

For the Ethicists out there, can you provide your thoughts of what is fair? This is an anal question is fair response.

Fair has nothing to do with equal IMHO. Fair means "abiding by the accepted rules." Guess what! It's your money so you set the acceptable rules. You may DECIDE that fair means equal. You may decide that fair means gifting according to perceived need. You may decide that fair means gifting according to which recipient is most (fill in the blank - respectful, good with money, least likely to waste it, most needy, on and on.)

I hate the word fair in most settings because you don't know what it means unless you know the rules. Once YOU set the rules, then you'll now how to "fairly" distribute gifts to the kids. End of rant and hope you come away from all this with a good feeling among all involved. SUGGESTION: Don't tell the kids what your rules are or what you have gifted to each one - but YMMV.

 

[Stormy Kromer]

No matter what is done, it can always be considered not fair.



I certainly experienced the unfairness of how I worked hard, saved hard, didn't waste my money, etc so people viewed me as somewhat successful.



My Sister, blew her money and only took a job if it was easy, was fine to live on gov't handouts at times.


So relatives helped out my Sister a bunch over the years with a lot of money, free new car, etc. Me I once got nothing..



So I'm sensitive to rewarding bad/poor behavior/choices while screwing over the child that is delaying gratification, working hard, etc.



I give equal gifts to the kids, as I'm not going to punish/deny one of them a gift because they are working harder or plan better. If the poor child wants more, they can do better on their own.



Neither child is handicapped which would be a different situation.

Well said.

 

[Sanstar]

I too like the Marxist approach. We have 3 grown kids, two married with a child. Single child earns a six figure income and doesn’t need/ want anything from us. Other two are grateful for what we give them. This has included paying off student loans, down payments on houses, new cars and ongoing private school tuition for one Grand.

They all know our assets will be split equally with one exception; the single kid gets the house. That way, all three will own their home, it levels up the one we don’t give $ to and all three have told me it’s totally fair.

I suspect the one getting the house will sell it and split the proceeds with his sibs but I will be long past caring.

We expect the parents to figure out what is best for their kids and let us know if we can help.

I don’t get too wrapped up with equal = fair. They have all told us it’s our money to do with what we will and if we didn’t help, they would lean on each other.

 

[ivinsfan]

No matter what is done, it can always be considered not fair.



I certainly experienced the unfairness of how I worked hard, saved hard, didn't waste my money, etc so people viewed me as somewhat successful.



My Sister, blew her money and only took a job if it was easy, was fine to live on gov't handouts at times.


So relatives helped out my Sister a bunch over the years with a lot of money, free new car, etc. Me I once got nothing..



So I'm sensitive to rewarding bad/poor behavior/choices while screwing over the child that is delaying gratification, working hard, etc.



I give equal gifts to the kids, as I'm not going to punish/deny one of them a gift because they are working harder or plan better. If the poor child wants more, they can do better on their own.



Neither child is handicapped which would be a different situation.

Wait a second the OP was asking about funding for grandkids not about rewarding someone for bad behavior. Maybe one kid is working hard with special needs children and the other is a Wall Street banker. What would have the "poor" child do? It's not always about the total amount of money you make.

 

[laurence]

Wait a second the OP was asking about funding for grandkids not about rewarding someone for bad behavior. Maybe one kid is working hard with special needs children and the other is a Wall Street banker. What would have the "poor" child do? It's not always about the total amount of money you make.

That's a really good point. As the son who "did well" while my brother STILL lives with my parents and has made it clear he expects to inherit everything and continue living there when they die, I've been made a bit sore on this subject. I haven't spent much time talking to my kids about this but made it clear I'm not subsidizing bad behavior. But yeah, if one is being just as responsible as the other and is just way behind, that may weigh on my decision. We do plan on transferring wealth before death, but seeing as my kids are teenagers it's a bit away...