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Having money to help the kids
Old 08-07-2021, 09:59 AM   #1
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Having money to help the kids

The question how much financial help to give kids has been discussed before, with many opinions given on the subject. I recently helped my kids but expect 100% to be paid back. It starts with one of my kids and spouse trying to buy an FHA Repo, no problem qualifying, but then problem after problem creating delay after delay, to the point, 6 months had elapsed.
After reading about how MMM made an impulse home purchase, I looked into his method, at about the 4 month time frame, just in case I had to help with the purchase. Following his write up, I did the following.
I opened an Interactive Brokers account and moved my Taxable account of Vangaurd mutual funds there. I don't want to sell and incur the tax hit. The account has Margin use available. I can margin up to 50% of my balance. I went 39%. More on that later*. I recently wired their homes purchase price to my bank. Then I had a mortgage written between them and me. I wired the money to the title company. They have the house I have a mortgage. The plan is for them to complete all repairs and make it ready for a traditional mortgage. I expect them to get a new mortgage within one year, I had the contract written for two years just in case. The interest rate for the margin loan is 1.35%. *If the market had a flash crash, causing my margin to go above the 50%, IBKR would sell some of my mutual funds to bring it back to 50%. I don't want that to happen. As a precaution, I opened a home equity loan against my house, I will transfer $100,000 into my IBKR account bringing my margin loan down to about 33%. The Home equity loan is only 0.99% for the first 6 months. I wrote the mortgage at 4% for the first year an 6% for the second, I hope that 6% is a big incentive for them to get the house mortgage ready.
I thought this might help others if they have funds they don't want to sell, but would like to make use of the money. More details on MMM blog.
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Old 08-07-2021, 10:53 AM   #2
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I doubt I would borrow to fund my kids' wants. I would not view that as "help", and I also would not view that as "having money", as the thread title implies.

I would probably borrow for my kids' basic needs - food, water, medical care - if that was the only way to do it.

But my kids and I are not at the point of houses and marriages yet, so I reserve the right to change my mind later.
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Old 08-07-2021, 11:07 AM   #3
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I believe that most parents have their own unique set of circumstances when it come to helping our their children.

A good friend of ours is on her way to the poor house in retirement because she continues to bail out her n'er do well 35 yr old son. We sometimes wonder what we would do in a similar situation. Hard to be an armchair critic where emotions are involved.

We helped daughter and husband this week to buy a business/investment property. Not a loan even though she insists on repaying. We do not need it, and will not need it.

Having said that neither of our children have the slightest insight into our financial resources.
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Old 08-07-2021, 11:21 AM   #4
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I can get cash on margin from Vanguard, so I don't see why you needed to move your funds.

I have been gifting to my son at the estate exclusion level for a few years. He had invested a good part of the money, and just closed on his first house a few days ago. I was willing to help a certain amount extra if needed, but he handled it. None of this put my own plans in danger. Not sure just what I'd have done if it did. Maybe loaned it. But it's really nice that the market has done so well during my 10 years of retirement, and I'm happy to share my good fortune. His monthly payment is lower than his apartment rent. He's essentially getting a small part of his inheritance each year. It helps him a lot now, and it probably prepares him better for when he does inherit a lot more.
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Old 08-07-2021, 11:26 AM   #5
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I can get cash on margin from Vanguard, so I don't see why you needed to move your funds.

I have been gifting to my son at the estate exclusion level for a few years. He had invested a good part of the money, and just closed on his first house a few days ago. I was willing to help a certain amount extra if needed, but he handled it. None of this put my own plans in danger. Not sure just what I'd have done if it did. Maybe loaned it. But it's really nice that the market has done so well during my 10 years of retirement, and I'm happy to share my good fortune. His monthly payment is lower than his apartment rent. He's essentially getting a small part of his inheritance each year. It helps him a lot now, and it probably prepares him better for when he does inherit a lot more.
We feel the same. We may as well give them some now (prudently) when they need it instead of years later (we hope) when they do not need it as much.

It is only money. We do exactly the same. Take it from our HISA or from our margin accounts.
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Old 08-07-2021, 12:07 PM   #6
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I can get cash on margin from Vanguard, so I don't see why you needed to move your funds.

My quick search shows the cost of margin borrowing as 7% at Vanguard, where IBKR is 1.3%. That's why I moved the funds.

Quote:
I have been gifting to my son at the estate exclusion level for a few years. He had invested a good part of the money, and just closed on his first house a few days ago. I was willing to help a certain amount extra if needed, but he handled it. None of this put my own plans in danger. Not sure just what I'd have done if it did. Maybe loaned it. But it's really nice that the market has done so well during my 10 years of retirement, and I'm happy to share my good fortune. His monthly payment is lower than his apartment rent. He's essentially getting a small part of his inheritance each year. It helps him a lot now, and it probably prepares him better for when he does inherit a lot more.
The kids are doing well, although one is just finishing dental college, They will soon qualify for 3 times the mortgage they are getting now. I'm glad they are buying a house well below what they will be able to afford in just a year or two. They are avid boaters, and love to fish. The house is on the water a short ride out to the ocean. This fits their lifestyle and I'm thrilled they aren't over buying and putting themselves deep into debt.
They ended up with two appraisals because of the long time frame, the house appraised $40k higher on the second appraisal. They neighbor just sold their home for 2.1 times what my kids bought theirs for, and another neighbor just put his up for sale at 1.7 times what my kids paid. I'm just happy to help get them into this position.
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Old 08-07-2021, 12:44 PM   #7
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One of my sons needed a large chunk for a down payment on a house. I gifted it to him and changed the POD beneficiaries for my other son.
We do not need the money, thank goodness, and the only thing I had to do was to file a form 709 with the IRS. Part of me said, "who would know?", but I like to sleep at nights with no worries.
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Old 08-07-2021, 12:51 PM   #8
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I gift money/stock to my daughter each year. Not sure she appreciates it yet but she does leave it invested which is encouraging. Part of the gifting goes into a roth and I've been doing that since her high school days so it's a good chunk of change (for her age). I like to think it gives her peace of mind, it definitely does me. One inspiration for gifting is WA state has one of the lowest thresholds for estate tax (2.1 mill?).
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Old 08-07-2021, 01:45 PM   #9
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We have only one son. We raised him same way as we were raised: you must take care of your wants on your own since 15-16 yo., and he did. Now our son has a top managerial position. Together with his wife saved money for a house.

We paid for their wedding, helped them with the down payment (50%) for their house and helping raising our 2 grandsons.
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Old 08-07-2021, 03:14 PM   #10
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I'm pretty fortunate- DS and DDIL are doing well but not lavishly and have never asked for anything but $15K when they bought a bigger house, which I gave them gladly. (Good thing- Baby #3 was on the way by the time they moved out of the starter house DS bought after graduation.)

I've got over $100K in the grandchildren's 529s and have told DS and DDIL I'm likely to gift them $10K at year-end. They have savings and, bless them, insist that they don't need it. I'll be leaving it up to them how to split that between an outright gift and more $$ in the 529s.

My motivation is concern about future inheritance tax laws as well as the increasing realization that despite my extravagant habits in travel, charitable donations and the occasional shiny bauble, I don't need to worry about outliving my savings.

I'm glad the OP found a solution that let his son/daughter and spouse by a house they wanted with no BS from the bank but hope I never have to do anything that elaborate.
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Old 08-07-2021, 03:22 PM   #11
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Originally Posted by 4legsgood View Post
I gift money/stock to my daughter each year. Not sure she appreciates it yet.
Ditto with my DD.... Except I'm pretty sure she doesn't appreciate it.... Threads like this make me question if I'm doing the right thing.
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Old 08-07-2021, 04:15 PM   #12
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I have two kids trying to figure out how to buy homes.
They don’t like my advice, “save more”. They entered adulthood years ago.

Neither are savers. In fact both tend to be “blowers”.
I hate wasting money but I like a nice quality of life.
We will leave something for the kids but I’m moving more towards supporting charities and blowing most myself.
Most of what my kids get is likely to turn into consumable assets: cars, clothes, restaurants. I’d rather see some of my money have a positive impact on the world.
It’s curious that our kids are like us in many ways but so different in others.
I would always help them with basics. Would never co-sign a loan with them.
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Old 08-07-2021, 05:12 PM   #13
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We would never co-sign a loan for anyone.
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Old 08-07-2021, 05:49 PM   #14
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Originally Posted by Gallaher View Post
I have two kids trying to figure out how to buy homes.
They don’t like my advice, “save more”. They entered adulthood years ago.

Neither are savers. In fact both tend to be “blowers”.
I hate wasting money but I like a nice quality of life.
We will leave something for the kids but I’m moving more towards supporting charities and blowing most myself.
Most of what my kids get is likely to turn into consumable assets: cars, clothes, restaurants. I’d rather see some of my money have a positive impact on the world.
It’s curious that our kids are like us in many ways but so different in others.
I would always help them with basics. Would never co-sign a loan with them.
Gallaher, don't feel alone here as many children are in the same boat and are living that lifestyle. I see it all the time and I know a few families where their kids are "living for today".
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Old 08-07-2021, 06:33 PM   #15
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We would never co-sign a loan for anyone.
When DS bought his first house he was a year out of college and had a good job but about 10% to put down and not much credit history. I offered to co-sign and explained that the ownership would be 100% his but the bank would come after me if he stopped making payments. His immediate response was, "Mom, I'd never put you in that position". I told him, "that's why I offered". He was able to find a loan at a good rate through a program that was put together for people like him right after the subprime mortgage crisis- it was meant to stabilize neighborhoods by selling to new homebuyers who would live there.

It's the only time I have ever made that offer and the amount would not have jeopardized my own finances.
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Old 08-07-2021, 08:39 PM   #16
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We dont cosign loans.
We did gift son a small amount so he could secure a good mortgage rate and avoid PMI 5 years sgo
He and wife will soon be able to upgrade to larger home using the considerable appreciation.
We're happy to have helped him get a start in our HCOL housing market.
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Old 08-07-2021, 09:04 PM   #17
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We dont cosign loans.
We did gift son a small amount so he could secure a good mortgage rate and avoid PMI 5 years sgo
He and wife will soon be able to upgrade to larger home using the considerable appreciation.
We're happy to have helped him get a start in our HCOL housing market.

OP here, my wife and I have been gifting money to our daughter and her husband to pay for her dental school tuition, we have one more $30k gift before the end of this year and that is all done. Then we will start gifting money to my son in an effort to play catch up. He is a better saver than she is, but I can't say she is wasteful, so I have no reservations about gifting money to them.
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Old 08-07-2021, 09:09 PM   #18
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OP here, my wife and I have been gifting money to our daughter and her husband to pay for her dental school tuition, we have one more $30k gift before the end of this year and that is all done. Then we will start gifting money to my son in an effort to play catch up. He is a better saver than she is, but I can't say she is wasteful, so I have no reservations about gifting money to them.
Check on this for yourself, but I think if you were to pay the tuition directly it wouldn't count towards the gift amount. I'm not sure of that.

What I do know is that you can gift $15K to both your daughter and husband, and so can your wife, so you could gift them $60K.

The $30K may be all you want to gift them, but I'm just pointing out there are options to give more, if you're so inclined.
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Old 08-07-2021, 09:12 PM   #19
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My son has a disability that makes it extremely challenging for employment. I paid for his home and also funded a taxable investment account. In addition, I gift money to him each year to ensure his expenses are covered. He is well educated with a couple of Bachelor degrees. We hope he gets steady employment soon, and I am always there for him.
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Old 08-07-2021, 09:19 PM   #20
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I have one child, a daughter.

My son-in-law has a high dollar engineering management job with a very well known digital components design and manufacturing company. They have more money than I do, live in a nicer house than mine in their high COL area, and so on. So far they haven't needed any money AFAIK, so this has not been an issue. Of course I still give them the usual Christmas/birthday gifts but nothing exorbitant.
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