Gifting with a warm hand

[Koolau]

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Originally Posted by marko +1. And any set of figures higher than that is handled through trusts, "corporations" and other advantageous vehicles that provide "protections", tax advantages and other benefits. Anyone physically inheriting say, $400MM is a victim of poor planning. Fortuitous poor planning for sure, but poor planning nonetheless.

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Originally Posted by street [/B] I would agree but I would take it and run!! LOL

Heh, heh, what a great problem to have. I'd cry about the taxes all the way to the bank!

[Gumby]

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Originally Posted by PlayinwithFIRE I watch my good hearted Mom do this every year. At birthdays and holidays, i see her handing out a few thousand here, a few thousand there to various relatives (including me) . What she gives me goes into short term savings, headed toward long term investment. However, I'm also the one who gets to hear her complaints when she sees some of her other benefactors (who invariably are crying poor) go out and buy a $2000 e-bike. The concept of long term enabling poor financial behavior is lost on her. It gets all mixed up with her religious beliefs My advice is : if you gift someone and you see them not able to make sound financial decision with it...well you're to blame if you decide to gift them again with the same discouraging result. Doubt she will ever take it-she's nearly bought her way into heaven at this point.

When my younger brother and I were in our 20s, the young wife and I were living in northeast Ohio and he and his wife were in Michigan. He had been on the road for work and was headed back home when he stopped in for an unannounced visit. I was home alone because the young wife was at school. While he was there, he asked if I could loan him some money to buy gas to make it all the way home. So I did. Then I had to go to work (I was on swing shift then). He went out to entertain himself for the afternoon and came back to our house to eat dinner with the young wife after she got home from school. Then he headed for his home in Michigan. He was gone before I came back from work. When I got home, the young wife told me how, at dinner, he had proudly showed her the "valuable" baseball card collection that he had just bought that afternoon for a song. Such a good deal he had gotten on it! Strangely, an amount almost equal to the money I lent him earlier that day for gas. He never did pay me back.

After that incident, I decided two things: 1) that I could never loan money to my family, only give it to them; and 2) that it was too psychologically burdensome to know or care what they did with the money after I gave it to them. I have stuck by that decision for almost 40 years. I have given family members money. But no matter what they tell me to support the ask, I never, ever later ask what they actually spent it on. It's just easier that way.

[athena53]

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Originally Posted by Gumby But no matter what they tell me to support the ask, I never, ever later ask what they actually spent it on. It's just easier that way.

I agree with both your principles: don't attach strings and even if it's supposed to be a loan don't count on getting it back. Late DH and I loaned money twice to family members of his (both needed to buy a car on an emergency basis) and were careful to lend only what we could afford to lose. Both, I'm happy to say, did pay us back.

Related story: when DS was buying his first house he had very little credit history. It was an inexpensive house and I offered to co-sign if it would get him a better rate. When I explained that the title would be in his name but the bank would come after me if he didn't pay, he said, "Mom, I'd never put you in that position". I told him that was why I made him to the offer! Fortunately he found an organization that was offering loans to first-time buyers who planned to live in the house (it was right after the financial crisis) and got a very good rate all on his own.

[ncbill]

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Originally Posted by Koolau Heh, heh, what a great problem to have. I'd cry about the taxes all the way to the bank!

I'd even pay IRMAA without complaining!

[brett]

We have gifted a few people. One thing that I will not do is gift someone who does not 'respect' money. We were happy to help out a BIL.

Another story for a SIL who lived her life in consumer debt. No use gifting her a dime. The gift will only serve to pay off a credit card and give her more room on the card to buy things that she does not need, cannot afford. I would rather give the money to our local food bank.

[PatrickA5]

Man, what we could have done with $200K at 30!

At 30 we were dead broke, with a kid. I was unemployed. Maxed out credit cards just to pay rent and food. Our 20-year-old car broke down and was going to be a couple of thousand to fix. I remember offering FIL $500 for an old car that never left his driveway. He refused, saying he could get $800 if he sold it to someone else. Needless to say, there was no warm-hand giving to us. We eventually pulled out of the downward spiral and righted the ship.

Our early history probably has a lot to do with how we view gifting to our kids. We paid for all three college and have given some substantial (but not life-changing) gifts over the years. The gifts are rare, so they don't "expect" them, but we know they are very much appreciated. Now that we have grandkids, the gifting will probably shift to them via 529 college savings.

[Koolau]

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Originally Posted by Gumby When my younger brother and I were in our 20s, the young wife and I were living in northeast Ohio and he and his wife were in Michigan. He had been on the road for work and was headed back home when he stopped in for an unannounced visit. I was home alone because the young wife was at school. While he was there, he asked if I could loan him some money to buy gas to make it all the way home. So I did. Then I had to go to work (I was on swing shift then). He went out to entertain himself for the afternoon and came back to our house to eat dinner with the young wife after she got home from school. Then he headed for his home in Michigan. He was gone before I came back from work. When I got home, the young wife told me how, at dinner, he had proudly showed her the "valuable" baseball card collection that he had just bought that afternoon for a song. Such a good deal he had gotten on it! Strangely, an amount almost equal to the money I lent him earlier that day for gas. He never did pay me back. After that incident, I decided two things: 1) that I could never loan money to my family, only give it to them; and 2) that it was too psychologically burdensome to know or care what they did with the money after I gave it to them. I have stuck by that decision for almost 40 years. I have given family members money. But no matter what they tell me to support the ask, I never, ever later ask what they actually spent it on. It's just easier that way.

Yeah, I've become convinced it's a bad idea to loan money to family members. It ruins their memories. I don't want to bring on early Alzheimers to my dear family.

[Route246]

From a practical and objective standpoint, personally, I don't feel like paying for education that will result in tangible earning power as a gift, it is more like an investment in the future that will pay off in terms of a better quality of life and hopefully and possibly pay forward to the next generation. It is investing money to make money. You are obviously blessed to have an intellectually ambitious and hard-working daughter who has focus and drive. It is difficult to put a value on that but congratulations, just the same.

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Originally Posted by Time2 We started gifting when my daughter, 3 yrs after graduating college decided she wanted to be a dentist, we gifted tuition through the premed classes, a Masters* and then the dental school. Wife and I each gifted ~$15k to her and we each gifted ~$15k to her husband every year, that way they got they tax deduction and credit. So for her the money available early let her start a dental career without student debt. On the other hand, if that money earned 9% for 20 years she would have $1.6M at 50yrs old. Simple math estimates say she should earn over $5M in the next 20 years. Will she save and invest to have that 1.6M at 50 yrs old? It would be easy enough, I hope she has way more. * the Masters was just a filler for the time when premed classes were complete and the dental school class year had several months to begin. Also, acceptance being competitive, she thought the masters would improve her chances. The next I'm hoping to gift my son into a house for an about equal amount. At this point we have it pushed back until next year, I've been trying to maximize my Roth Conversions and figure next year we can ease off and start gifting to him. Whether it's a down payment or gift the mortgage payments is yet to me decided.

[Route246]

I inherited 7-figures at age 66. It made me sad because I lost my my father who was 99. I deposited it in Vanguard and DCA in Vanguard 500. It is doing very well.

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Originally Posted by livingalmostlarge I think many people do inherit 6 figure amounts. I always wondered what they do with it.

I'm one of those who inherited 7 figures. Our investable assets are in 8 figures so it had little effect in terms of life-changing consequences.

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Originally Posted by street I also know that some inherit 7 figure amounts.

I don't consider myself lucky as I lost my father but I get your drift.

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Originally Posted by aaronc879 They are referred to as lucky sonsofb**ches.

Wife and I struggled and were close to broke or negative when we first married but we consider ourselves "self-made" deca millionaires today without making a score or quick hit. It came gradually, linearly and consistently, mainly by living below our means and investing in Bob Brinker's model portfolio 1 for all intents and purposes. It worked and the power of compounding really kicked in during the past 15 years.

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Originally Posted by RenoJay I consider myself a “self-made” deca millionaire, but early on I got some help. Mom and Dad made me an interest free loan towards a down payment on first home when I was 25. I repaid them about ten years later. That home equity (it appreciated a lot quickly) was essentially my first wealth, but almost simultaneously with selling the home I got a nice pay day from a company I had started. Fast forward 20 years and parents are reducing their estate with annual gifts. I have mixed feeling, TBH. Something about receiving gifts makes me feel “less then” and entitled. But I went through a lot of hell (my first three businesses failed) before I struck gold so I do feel like I had the appropriate amount of struggle as a younger person. The gifts they give now are totally inconsequential, but I think it would feel somewhat unfair if they were gifting my sibling and not me.

One thing I feel now is that gifting has to be done carefully and only where there is low risk of it doing more harm than good. This is a tough ask.

[Koolau]

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Originally Posted by Route246 I inherited 7-figures at age 66. It made me sad because I lost my my father who was 99. I deposited it in Vanguard and DCA in Vanguard 500. It is doing very well. I'm one of those who inherited 7 figures. Our investable assets are in 8 figures so it had little effect in terms of life-changing consequences. I don't consider myself lucky as I lost my father but I get your drift. Wife and I struggled and were close to broke or negative when we first married but we consider ourselves "self-made" deca millionaires today without making a score or quick hit. It came gradually, linearly and consistently, mainly by living below our means and investing in Bob Brinker's model portfolio 1 for all intents and purposes. It worked and the power of compounding really kicked in during the past 15 years. One thing I feel now is that gifting has to be done carefully and only where there is low risk of it doing more harm than good. This is a tough ask.

True and where kids are concerned, there is the issue of "fair vs equal." We tried to thread that needle to some extent - giving each kid what they "needed" and could handle while making some attempt to keep them "equal" at least over time. Quite a juggling act when it's your kids.

[bookman51]

Our estate lawyer advised us to give some of our money while we are still alive to see and enjoy the results. We have followed her advice to a limited degree in establishing some scholarships and donor advised funds. The results have been mixed. Some scholarships awardees have written nice thank you letters and some no thank yous at all. With the local nonprofits we support through the donor advised fund, the recipients have been good about writing thank yous.

We have been more careful with family. Appreciation can turn to entitlement very quickly. And, on my part, it is real tempting to attach strings to money or to try to control things beyond the grave via stipulations in the will/trust. With a scholarship with an institution of higher education or a donor advised fund with a local community foundation, the criteria are set in the agreement, and one more or less walks away.

[RobLJ]

This is a really complicated issue, that like taking SS, to my mind depends a lot on a huge number of circumstances, further complicated by the people/heirs involved, their readiness/need/etc for money, etc. So I don't think anyone posting here is "wrong."

We are still a bit unclear on how much excess we will have, so we contribute to the 3 grandkids' college funds at the beginning of the year and help a little, mostly over the last 8 years by donating used vehicles to them; youngest yewt lives with us since we have a lot of unused space and he is still debating on whether to stay working for the insurance co in Reno or going to the Bay Area/Central Valley closer to his older brother the winemaker. It essentially is unused space in the house here, so it doesn't really matter, at least to us.

We are giving 600-900/month to my Aged Mother to support her and have done so for her and my deceased father for the last 15 years, but she is 90, so that won't continue for too much longer. When that ends, then we'll rethink the grandkid college support and other charitable giving. It's very much a moving target, although it's pretty clear that we have more than we are comfortable spending, but we're not spendthrifts.

I thought we splurged on the Mt Blanc hiking trip that finished 2 weeks ago, but DW was able to see her brother who has worked/lived in Germany for 30 years and isn't in the peak of health, so it was well worth the money. How many times she will be able to see him in the future and whether I can tolerate 4400 feet climbs in a day at 65 are an open question. I hate cruises unless I can just read, which I can do at home. (We met the brother-in-law in Geneva, after the hike for 4 days).


One active European trip like this and a couple driving/hiking trips in the US is enough for me; here in Reno there are so many Sierra hiking/camping venues within an 8-10 hour drive that it is almost incredible. I don't want a bigger house and we have the Bolt and the PHEV RAV which are good for another 6-8 years at least. I do go on Blow the Dough to try to figure out how to blow the dough effectively, but I don't want a boat or a mistress and eating out once or twice a week is enough. I could blow it on more books and records, I guess. Or headphones. We are taking the grandkids on special trips for their birthdays, so I guess trips in the future are a good possibility, like Athena (or someone else; if so, sorry Athena!) has posted on Blow the Dough. I'll never forget staying with the Okie granddad and grandmother in their Colorado cabin and fly-fishing/backpacking with him. I still dream about where we used to camp and my twin, before he became sick. A River Runs Through It was almost an autobiography of my summers, back in the good old days when my twin was healthy. (Sorry to ramble but I think experiences are very very important as a legacy, particularly for grandkids, but that's just because those experiences were so important to me.)

[Stormy Kromer]

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Originally Posted by street I have mixed feeling on giving to my only son and family while they are in their younger ages (under 50 years of age). I think it could do more harm than good. After saying that we have gifted once to my son/family for a new home when they got married. They both had homes neither homes worked for their needs so my son bought one that worked and with mortgages on their existing homes getting another mortgage was going to be a nightmare. So, we gifted him the money using the lifetime inheritance gifting option. It was nice to been able to help them out, but I feel it makes too easy for them. I like to be there financially for them as a safety net only, not as their handout program. I believe a too big of gift can put a negative mindset for these young people. Even if they are hardworking and have not asked for anything or asked for help financially in their life.

I agree

[livingalmostlarge]

So interesting the varying thoughts, although many say no.

I'm pretty torn. I suspect we'll be in a better position than our parents were and our parents will not be gifting us anything until death. That is potentially a long time for us. But even then it's not expected.

But for me and DH? I am sitting here about to file a gift tax return for DKs and I file their tax returns annually because I opened UGMA accounts for them and funded it with out money throughout the years. So we've both already done way more than our parents did (mostly because our parents helped us get started by going to college and getting lucrative careers).

We've struggled a lot but are ridiculously well off compared to where our parents were at the same age and with kids. So i'm just unsure how things will play out.

If we are successful the gift returns I'm filing witll be worth a lot to each kid. It'll have moved a lot of money out of our estate. But it'll allow each child a substantial sum at age 30, 35, and 40 separate from the college and UGMA accounts i have for them.

Plus if things go well then I can defintiely see us funding each kid's account $30k/year permenantly and asking my mom to do the same and giving her something as well.

[RobLJ]

We have and will get nothing (well I might get 100k back from the AgedP's house but probably not). I never expected anything. They raised me and helped me a bit in undergrad, then Dad took a 1.5k loan to help me get to grad school in Cali.

But I think we have a responsibility to help the 3 grandkids through college and then charities. I have been blessed and I don't expect to just give what my parents gave to me.

To whom much is given much will be required. (I'm hearing my minister father here, even though I'm not religious per se). And this is just a rule for me, not for all yall, just to be clear. It's kind of Hemingway personal code, even if it is Scripture.

[Gumby]

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Originally Posted by RobLJ ..... To whom much is given much will be required. (I'm hearing my minister father here, even though I'm not religious per se). And this is just a rule for me, not for all yall, just to be clear. It's kind of Hemingway personal code, even if it is Scripture.

Words that have guided my life as well.

[Joylush]

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Originally Posted by SecondCor521 Yes to all the questions in the second paragraph. I have additional reasons for warm hand gifting: 1. I can see the impact - good or bad I would rather know. Good means I can enjoy seeing the benefit; bad may mean I need to change future gifting. 2. I might have an estate tax problem. Gifting earlier is more impactful. 3. I can provide advice (if asked) about how to handle the gift. Harder to do when I'm dead. I also do charitable giving for similar reasons. I may also execute a partial disclaimer for similar reasons. I would probably take the $500K at 50 since I was divorced at 37. FWIW, there's a BH thread with the same title I have open in a different window: https://www.bogleheads.org/forum/vie....php?p=7459727 Maybe there's some good thoughts there.

Can you expand on what you mean by item #2 ?

[Koolau]

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Originally Posted by RobLJ To whom much is given much will be required. (I'm hearing my minister father here, even though I'm not religious per se). And this is just a rule for me, not for all yall, just to be clear. It's kind of Hemingway personal code, even if it is Scripture.

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Originally Posted by Gumby Words that have guided my life as well.

Likewise. It's more blessed to give than to receive is the one I keep coming back to. YMMV

[Dash man]

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Originally Posted by Joylush Can you expand on what you mean by item #2 ?

I’m in a similar situation, so I can give you my view. Currently our net worth is no where near the Federal Estate Tax exemption, but things will change in 2026 under current law. We are hovering just under the expected Estate Tax exemption projected for 2026 and beyond unless the law is changed. So by gifting to family and charity, we are preventing our kids from paying the Federal 40% Estate tax on assets over the exemption. Unfortunately, we can’t avoid the Pennsylvania Inheritance tax.

[Koolau]

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Originally Posted by Dash man I’m in a similar situation, so I can give you my view. Currently our net worth is no where near the Federal Estate Tax exemption, but things will change in 2026 under current law. We are hovering just under the expected Estate Tax exemption projected for 2026 and beyond unless the law is changed. So by gifting to family and charity, we are preventing our kids from paying the Federal 40% Estate tax on assets over the exemption. Unfortunately, we can’t avoid the Pennsylvania Inheritance tax.

Heh, heh, you could move!

We have saved thousands in taxes by moving - and we haven't even died yet.