Inequality with my kids--how to handle

[Maenad]

Quote:

Originally Posted by NW-Bound About the question posed by the OP, I agree with earlier responders that the intention was to provide his sons with the education. Excess money due to good market return is not a windfall profit for the 2nd son to keep. I would save the surplus for the future generation.

+1

[pb4uski]

Thanks for all the input on my post. I was leaning towards View B and your input reinforces that leaning. Not sure what form the equalization will be... I hope that he decides to go back for some more education... or it might be that he gets "settled down" and we help out with a down payment... but only time will tell.

[Jerry1]

Quote:

Originally Posted by Amethyst You can also count on that amount if either child, but especially 2d son, has an emergency need for cash. Let's hope it doesn't happen, though!

Plus, isn’t a 529 plan transferable to a future grandchild? That may be another way to spend the “extra” funds down.

[PatrickA5]

We have 3 kids. DD#1 went to undergrad and grad school - which we paid for. DD#2 went to community college (free) and started undergrad, but stopped going. DS#3 is a senior in college and might go to grad school - which we will pay for.

We basically just told the kids we'll pay for college. Whether or not they actually completed college was up to them. They never had any idea of how much was in the 529 plans - that was just our vehicle for saving for college. It was never intended to be their money. We've told DD#2, that if she decides to go back to college (or other type of training), we'd be happy to pay for it. She got married and gave us grandkids. We're making up for her shortfall by spoiling the grandkids!

[Chuckanut]

FWIW, I have two kids both in their 30's who have taken different paths. One, has decided to go to college and get her B.A degree in a field that interests her and has a good future. I am paying for a good part of that. Fortunately, she has a few small scholarships and is going to public colleges. The other is working in a rather low paying field. I have initiated the 'Daddy Match' for her Roth IRA. She puts in a dollar, I put in a dollar.

It's the best I can do for each of them, and will come out fairly in the end, I think. I see no point in hanging on to every dollar and having them wait until their 50's or even late 60's before they inherit anything. A bit of help now, and maybe they won't need the inheritance later.

[bja1234]

They were equal when you funded the accounts. The End

[Canoeboy]

I’m of the camp that what you offer/provide to each kid be reasonably equitable (not necessarily equal in $$ amount). 4 years of college, health care until 26, car and insurance with roof over head and food on table until they are established. We have 2 kids and had 2 529’s. Remaining balance in first one was rolled into second after first finished school. If any is left when 2nd child finishes we will Aggressively invest the balance and use for future generations. You are the owner of a 529 account. The listed beneficiary(ies) becomes the owner when you pass. Owners can change the beneficiary as they wish. Much better approach than UGMA/UTMA where the money is gifted to the child and they have to deal with tax consequences.

[Delaney]

I don't think college is right for every child and it doesn't always result in a higher salary. I think offering money for college or a house down payment down the road makes sense. It doesn't have to be the same amount. Everything doesn't have to be equal. If helping someone with a house down payment saves them from throwing away money on rent for years, that is a great gift and will really help with their future.

[imnontrad]

I "gave" my daughter's a college graduation present of offering to give them $1 for every $2 they put into an IRA/401K for the first two years. One took me up on it for a small amount, and the other did not. Now, I am funding 529s for grandkids. I am putting in the same amount but because of the time to compound, some may benefit more than others. That's life.

You honestly gave each child the same and the market intervened. Plus, your kids made different choices that resulted in different costs.

BTW, You CAN withdraw the money you put into the 529 without penalty and then just let any interest ride for others ((or transfer the 5299 to yourself and take some classes!)

[pb4uski]

Quote:

Originally Posted by imnontrad .... BTW, You CAN withdraw the money you put into the 529 without penalty and then just let any interest ride for others ((or transfer the 5299 to yourself and take some classes!)

Interesting. Is there protocol for determining how much is contributions and how much is growth? For example, I one puts in $25k and it grows to $40k and $35k is used for education costs, is the remaining $5k unused contributions or unused growth?

[FlaGator]

In a recent conversation with Vanguard on withdrawals, I was told I could not take out only contributions, it was all pro rata. So, some amount would be taxable.

Haven’t confirmed with IRS publications, but what I was told fits with the policy of making sure everything gets taxed, even if just a bit

[urn2bfree]

Quote:

Originally Posted by FlaGator In a recent conversation with Vanguard on withdrawals, I was told I could not take out only contributions, it was all pro rata. So, some amount would be taxable. Haven’t confirmed with IRS publications, but what I was told fits with the policy of making sure everything gets taxed, even if just a bit

This is my understanding as well. All withdrawals are pro-rated.



BTW for clarification or reiteration-- (I am the OP)- this goes well beyond the 529 question... the UGMA/UTMA account has ballooned nicely for the younger son and was completely spent in the account of the older one- mostly as result of the graduate school tuition and the whims of sequence of return risk.


At this point the younger son has reached majority and controls the large UTMA account, though he has asked that I manage it for him for now while he is in school. It will be up to him to do with it what he wishes. I will add he does not really know how large it is-- though I have offered to go over all that with him, I think he is better off not knowing for now-- and he seems to feel the same way.

[Old Microbiologist]

I take a completely different attitude. My second divorce from the mother of my son and daughter happened when my son was 15 and daughter 12. She became a lesbian and cheated incessantly so I ended it when she demanded I move out fo the maser bedroom so her girlfriend could move in. She is a big time corporate lawyer earning over $500k a year so I was not required to pay child support. I paid voluntarily $2,000 a month until each reached 18 (just so I could tell the kids I did my part although they never saw a dime of it). I have paid for nothing since except randomly bailing them out when in trouble financially. My third wife and I live very well with $90k a year in pensions and roughly $1 million in cash and equities with an exceptional property in Hungary which is free and clear. Both my children have been barely surviving although my son is finally doing well and my daughter is slowly becoming successful as well. He lives in Beer Sheva, Israel and is the sales manager for a tech company and she lives in NYC and is a multi-media producer for an online video company. Both are earning roughly $2,500 a month. The mother is still earning tons of money but gives them nothing if she can avoid it. I pay for them to visit us with airline tickets etc. when they are willing to visit (which has been one every 10 years). I am not close to either child and only communicate by chat never by voice as I am too critical and give too much advice they don't want to hear. They are both snowflakes. I am, as you can imagine, not pro-LGBT. Hungary is a good pace to live for that reason. Eastern Europe is not tolerant of western liberalized ideas so I fit in well here. I worked for the Army 40 years (26 active duty and 14 as a civil servant) so I have that kind of attitude.

Perhaps it sounds cruel but my parents who were also well off financially, never paid for anything for me (literally ad they even charged me rent after the age of 16). I have worked since the age of 12 and full time since 15. Many years I had 2 full time jobs. I never went to school without also working full time. I have an AS, BS, 2 MS and a PhD (at Cornell) all paid for by myself one way or another. My brother is much the same and has a BS, MS and DMA (Doctorate in Musical Arts from Yale as he is a professional symphony clarinetist) and then got a JD (Doctor of Jurisprudence "attorney") on top of that. He and I differ on paying for the kids schools. He paid for all of his kids and I paid nothing just like our parents did for us. My brother left home at 16 to go full time to university and I left at 17 when I joined the Army where I stayed 26 years. I got all my degrees at night while in the service except the PhD which I was sent for by the Army but I had to pay back 8 years of obligated service so I consider that as a form of indentured servitude.

Anyway, to the point of this thread we are well off, their mother is even more well off and no one is giving the kids anything if not really necessary. They are completely on their own for all intents and purposes. My ex-wife also has a ton of degrees with 2 BS, 6 Master's and a JD and is married to a Senior Executive Service civilian making $250k a year herself. It might surprise you that I am on good terms with my ex. We were married 25 years after all. My current wife was on good terms with her ex's as well but her second husband died 2 years ago but she still speaks regularly with her first husband who she was married to for 25 years. He is a train-wreck and completely bankrupt. When they divorced they were millionaires as she ran their business but he kept everything and ran it into the ground after.

Of course we will help the kids if needed and all they have to do is ask but so far they are also proud and now that they are improving professionally, I think they now appreciate dong things on their own better. At least I hope so. I do communicate with my son more regularly now as he has finally matured and understands better. It is still only chats though. He really hated me violently for years so it is on tenterhooks. My daughter is distant but perhaps things will change with her as well. It is tough as no matter what I say or do it is received as overly critical. I am okay with it either way and have accepted their distance. I was never all that close to my parents either having left home young and not really returning at all. I did move my mother here to live with us (not my choice but my wife's) in Hungary which was not easy as she is a piece of work with severe narcissistic personality disorder. We sent her back after 5 years to an assisted living facility near my brother who completely despises her. She is getting frail and completely deaf and nearly bind so impossible to manage here as she doesn't speak Hungarian and few Hungarians speak English. They also can't manage an older person with a nasty personality. Hungarian culture revers the elderly but in general old folks here are really nice. I supported my mother for more than the past 30 years and my brother never so it is time for him to pony up. He is a fine person but for whatever reason, and I am sure it is a good one, he has hated her his whole life. She is a financially incompetent although has $40k a year in pensions was always in debt with impulse spending on her credit cards. She is still going strong at 95 and I am happy she is doing fine in her facility and giving grief to others and not myself or my wife. My brother has her captive with a fixed allowance on a debit card. She still gets out to go shopping on the facility shuttle bus. So, in a sense we had the reverse situation of children supporting a parent rather than parents supporting our kids. My wife's children both died younger so we have no financial issues with that other than maintenance of the cemetery plots. We do not anticipate my kids ever doing anything for us so we are on our own. They will likely both inherit quite a bit from us and my revenge will be they will have to figure out how to deal with estate issues in Hungary. I doubt their mother will leave them anything. She will leave everything to the LGBT community. She is also very sick with some serious genetic diseases so probably won't live to retirement. She is younger than I and is only 60 now and has no plans to retire. Not my problem thankfully. So, it will be interesting to see if she leaves them anything at all. I know she is sitting on at least $6 million and probably much more by now.

[HMMY]

We did not fund our kids' 529s equally, due to market fluctuations. We funded them so the amounts would be about equal. Our kids will likely want to go to top tier schools; however, they will likely be offered merit aid at non top-tier schools. To encourage them to consider state and non top tier options, we told them we would pay for 4 years undergrad wherever they wanted to go, but whatever was left over could be used for grad school or would be given to them in cash when they were financially independent.

In your case, I would give the 2nd child the same cash amount once the child is financially independent as was spent on the 1st child's education and use the balance to fund the 529 for future grandchildren or pay the penalty and distribute it evenly between them or use it yourself.

[PatrickA5]

Quote:

Originally Posted by pb4uski Interesting. Is there protocol for determining how much is contributions and how much is growth? For example, I one puts in $25k and it grows to $40k and $35k is used for education costs, is the remaining $5k unused contributions or unused growth?

To answer your question, the remaining $5K will be a mix. The 529 administer keeps track of the allocation. I don't think there is any way to withdraw only contributions.

[texasdiver]

I'm not sure why the obsession with balancing dollars vs treating both kids fairly and equitably. The 529 accounts do not belong to your kids. They are YOUR funds to do with as you see fit.

I have 3 kids, one finishing college, one in 8th grade, and one in 11th grade. Our objective is to do what we can to launch each of them into post-college adult-hood without student loans hanging over their heads. How we get their with each child is going to be completely different.

Child #1 attended a moderate cost out-of-state public university in a rural area. In addition to tuition we funded her inexpensive apartment and have been covering some car costs for her to commute to campus. As well as some summer study-abroad stuff. Child #2 is looking at in-state schools in the big city (Seattle) where tuition costs will be lower but living costs will be much higher and she won't need a car. She is also hoping to do study abroad in Latin America.

I don't have any notion of which child will end up costing us more. I'm not even going to track it. Yes, we use 529 plans but the kids don't know how much $$ is in them. It's not even something we discuss with them.

Our attitude is that as a FAMILY we are going to do what we can to see all our kids through college without debt. That means everyone contributes to the effort as they can. Us parents by providing $$$. The kids by earning scholarships, summer and after school jobs, and living frugally. It is a group effort.

In your situation, just leave the money in the 529 plan for the time being. It is YOUR money and eventually the circumstance will arise to spend it. Maybe a grandchild. Maybe future grad school for one of your kids. Who knows. This isn't a corporate end-of-year "use it or lose it" accounting situation.

[Ed_The_Gypsy]

Quote:

Originally Posted by fh2000 I also funded my 2 kids' UTMA since their birth. By the time when both graduated, one left with a large balance. The other kid had summer intern and part time work and still short of few thousands which I funded from my checking. They do not know their balance all along and only know they had an education fund. I do other things to balance the difference. So the issue of inequality is in your mind, unless you actually told them the balance. If you feel the elder son is short changed, and you have sufficient funds in your checking, I would fund his Roth IRA and HSA if he is eligible. Do it few times until he received enough to match his brother's balance.

We funded their Roths.

[Blue Collar Fire]

Quote:

Originally Posted by urn2bfree This turns out to be a typical first world "problem." The kind of problem it is good to have... I am not sure anything at all needs to be done, or can be done or should be done about this situation between my two sons, but it points up the effects of different life choices and SEQUENCE OF RETURNS effects, and the power of compounding--- Betweeen UTMA and 529 accounts, I saved up what were essentially equal, sizeable amounts to fund my two kids' educational choices. The older one went to school 3 years earlier, to a slightly more expensive private school and then also attended graduate school As a result of that, and because he began school fund withdrawals in the midst of the big market recovery, he ended up using up all of the money in his name. No worries. He has a great job, great salary, etc. Meanwhile, the younger son is scheduled to graduate in May 2020 and even if he were to go to graduate school, which he is not considering at present, will wind up with A LOT MORE money in the UTMA, thanks largely to Mr Market and the timing of withdrawals after the big run up, as well as slightly lower tuition expenses. I did put a little more into the younger son's account early on -by mistake- and the compounding certainly has paid off for him. And the 529 will not even be anywhere near depleted. I know I can reassign the 529 to a future grandchild or even to my own qualified educational expenses if I so desire-- or take the 10% penalty and pay the taxes if I really want to... but probably won't do that latter thing. So should I encourage my son to do anything to "even things out?" . Or is this just the way the cookies crumble and there is nothing to be done?

An interesting dilemma indeed. My first thought was "yep, that's how the cookie crumbles" and it's a good life lesson on the unpredictability of market performance for both kids. I would probably let the 529 ride if I didn't need it, simply for the tax benefit, in case it can be transferred to another beneficiary later on in life. The UTMA's worked out the way they did through no fault of your own and neither of the kids should have a beef with that. I'd call it a job well done and move on. Anything moving forward in terms of additional help should probably be as equitable as possible so as to avoid animosity between the boys. Kudos for setting them both up for success!!

[rkser]

To the OP,
I came close to withdrawing the unused funds from one of our 529 Plans & after paying the penalty writing the check to one of our kids.

Being impartial to each of the 2 kids was our prevailing thought to prevent any future misgivings between them, education or no education. Each person is different & not everyone has got what it takes to be good in higher studies.

Our two 529 Plans for the kids ended(ending) ended differently, we had planned to fund each kid's Undergrad & Graduate School & equally funded the two 529 Plans.

DD fully used the Plan meant for her, got two graduate degrees and has launched very well.

In case of DS who is 8 yrs younger than his sister could not complete his Undergrad & went to work for 2 yrs. By then his 529 had ballooned & we were left wondering what to do with the money left in the Plan. I was debating either to write him the check or leave the unused funds for his children.

I guess better sense finally did prevail on him (Jury is still out), he came back home, completed his undergrad, got a better job at his Undergrad School & has now started an Executive MBA. Finally the 529 ear marked for his education is finally getting used.

Although many fund their kids education, it finally depends on the kids, how they make use of the opportunity (Funds). Anyway, in our case this is the way the cookie crumbled