How much to give away

[Joylush]

I would not worry about giving away any money to relatives at 54. You would be creating a dependence that could enable bad behavior. This is exactly what happened to my father-in-law. He has given away over $760K over the past 18 years to my sister-in-law who evidently can't survive on their income of $9500 per month. My sister-in-law is now 51 and both she and her husband have zero savings and are in a precarious position as they approach their retirement years. My father-in-law has cut them off this past year and now they are asking us for money. They will not get any. I am 56 and over a year into my retirement and am in a similar position to you with respect to income and spending. We have zero debt and during the first 12 months of retirement, we managed to save about $118K. We can survive easily on $4500 per month excluding travel and leisure. We continue to grow our investment portfolio (70% investment grade bonds, notes, and preferred shares and 30% cash). We are spending money on home improvements that will make our lives more comfortable. We spent 6 of the last 12 months travelling. We just came back from a 2 month trip to Europe. My advice would be to spend your money on leisure and enjoy life. Focus on staying fit. You can give some money to legitimate charities and give nominal gifts to your family. When you make life too easy for people, they no longer have any incentive to better themselves and their family.

I couldn't agree more. That's exactly what I want to avoid (enabling bad behavior or rather rewarding it). I'm contemplating paying off some student debt for a good friend of my daughter's who has shown herself to be a responsible young adult.
I'd just like to give enough away so as to avoid owing estate taxes and as it stands now I will owe them. Giving more to the government to waste bothers me more than helping folks who are in need who may be wasteful with what they're given I guess. At least it allows me some control.

 

[easysurfer]

I recently had a will drawn up to purposely avoid the situation where dying without a will, there'd be an even split for my surviving potential heirs if I died intestate. I believe in rewarding those who been responsible with their money and way of life rather than me being kind to everyone knowing from their past pattern they will chuck any inheritance or gift away.

Also, there are other family dynamics involved too, such as one person my not need any of an inheritance. Or one person my be close but his or her spouse spends money like it is going out of style.

 

[Freedom56]

Keep in mind the estate tax exemption for an individual is relatively high. Per the IRS:

"If an asset is left to a spouse or a federally recognized charity, the tax usually does not apply. In addition, up to a certain amount varying year by year can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes: $5,340,000 for estates of persons dying in 2014, $5,430,000 for estates of persons dying in 2015, and $5,450,000 (effectively $10.90 million per married couple) for estates of persons dying in 2016."

Under the current rules only the largest estates will have to pay estate tax.

 

[Joylush]

Keep in mind the estate tax exemption for an individual is relatively high. Per the IRS:

"If an asset is left to a spouse or a federally recognized charity, the tax usually does not apply. In addition, up to a certain amount varying year by year can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes: $5,340,000 for estates of persons dying in 2014, $5,430,000 for estates of persons dying in 2015, and $5,450,000 (effectively $10.90 million per married couple) for estates of persons dying in 2016."

Under the current rules only the largest estates will have to pay estate tax.

Yes, I know this. I'm still concerned about it though. What I didn't factor in was the fact it will likely keep increasing year after year so I may not have to worry about it. I guess I need to learn to spend more.

 

[medved]

For me, the issue of giving to charity and giving to family are very different. For charities, I give annually to those that I want to support. But I don't give any amounts that could reasonably be expected to affect my future ability to support myself. The larger amounts -- which I would like to give to charity, assuming I have enough to live well on for the rest of my life -- I have left as beneficiaries of my retirement account. So the charities will get the money I want to give them; they just have to wait until I die. (The rest goes to wife, who I am pretty sure will outlive me).

For the kids, they have grown up relatively well-off, and I am concerned that, if I make it too easy, it will impact adversely their work ethic. One of my kids in particular is pretty lazy and they are both over-entitled. So I will pay their college expenses in full, and give them other normal support (clothing, healthcare, and a bit more). But I would not give the kids significant cash gifts until they have shown a good work ethic. They will inherit some money, when wife and I die, but hopefully by then they will have seen what its like to work for a living and developed good work ethic. And if not, then I will be dead so I will not know about it.

 

[seabourne]

If you are looking at not giving money now but providing value, you could look into purchasing a deferred annunity (or annually purchase lump sum deferred one of $14k value) with annual payments of $14k per year, say to begin payment when they hit 65. Would allow you to provide larger future value while not providing immediate financial support but providing some peace of mind.

 

[CaliKid]

I would not worry about giving away any money to relatives at 54. You would be creating a dependence that could enable bad behavior. This is exactly what happened to my father-in-law. He has given away over $760K over the past 18 years to my sister-in-law who evidently can't survive on their income of $9500 per month. My sister-in-law is now 51 and both she and her husband have zero savings and are in a precarious position as they approach their retirement years. My father-in-law has cut them off this past year and now they are asking us for money. They will not get any. I am 56 and over a year into my retirement and am in a similar position to you with respect to income and spending. We have zero debt and during the first 12 months of retirement, we managed to save about $118K. We can survive easily on $4500 per month excluding travel and leisure. We continue to grow our investment portfolio (70% investment grade bonds, notes, and preferred shares and 30% cash). We are spending money on home improvements that will make our lives more comfortable. We spent 6 of the last 12 months travelling. We just came back from a 2 month trip to Europe. My advice would be to spend your money on leisure and enjoy life. Focus on staying fit. You can give some money to legitimate charities and give nominal gifts to your family. When you make life too easy for people, they no longer have any incentive to better themselves and their family.

100% agree. My kids are still young so I am hopeful I can avoid creating dependence as they age. I try to teach them about money all the time and let them pay for a portion of things they really want. Hopefully that will help to create independence as they get older. I am worried as I know how easy it is to help your kids... but I worry it's not help in the long run.

Keep in mind the estate tax exemption for an individual is relatively high. Per the IRS:

"If an asset is left to a spouse or a federally recognized charity, the tax usually does not apply. In addition, up to a certain amount varying year by year can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes: $5,340,000 for estates of persons dying in 2014, $5,430,000 for estates of persons dying in 2015, and $5,450,000 (effectively $10.90 million per married couple) for estates of persons dying in 2016."

Under the current rules only the largest estates will have to pay estate tax.

However, you have to remember the IRS can change the rules anytime they want. The exemption had been set at $600k for about 20 years and then jumped to $5m within a few years. Plus, as recently as January 1, 2013 the law sunsetted (from about midnight until sometime that morning) and reverted to $1m exemption. If the economic times get bad I would not be shocked to see the gift/estate exemption go down.