How much $$ to leave kids?

[kannon]

We too are planning and hoping to be generous to our two kids. We are concerned though how best to do that knowing their financial planning skills are lacking as well as their willpower. Anyone looking at trusts as a way to control how they pass their estate assets to their kids?

 

[tb001]

My personal view is that if you’re choosing to retire early, part of that includes making sure you aren’t going to short change your children. So in our budget, kids activities are well funded, as is college, etc... and I think it’s great to establish a baseline for what you want to be able to provide for your kids.

That said, at 95% in firecalc there’s a lot of room for upside. Our plan is to make sure the basics are funded for them and they will share in any upside.

For us, the basics are college costs at a state school and hand me down cars. We have enough discretionary in our budget that we could mix some of our extras and do more for them in a given year if necessary, but it’s not in the plan.

Like others, I would vastly prefer to minimize the chances that they would need to care for us, so unless our trajectory is looking positive, we’re not planning for big gifts.

I would exercise caution around the 100k/350 per month though, unless the goal is to show them how great passive income can be if you’re saving. My concern would be that it encourages them to live above their means.

I feel like we’re in a relatively high bracket, but we would have to have far more $ than we do to ever spend $75k on a wedding. And even then it would be hard to stomach for me. This is likely just different priorities though—the $ we spend on other things would probably be nuts to many here.

I also would caution setting expectations with kids about $ they’ll receive. I don’t think much good comes from people ‘expecting’ $ they didn’t earn. Too often it comes with the attitude that it’s somehow rightfully theirs and the value isn’t appreciated.

FWIW, our kids are very young. We’ve set up a staged inheiritance in our will. I’d much rather see a 25 year old blow through 10% of an inheiritance and hopefully learn a lesson vs have 100% gone.

 

[ncbill]

Any inheritance comes from whatever's left over.

I was very clear with the kids that the priority is taking care of the parents so they hopefully won't be a burden on the kids.

But please decide early & communicate early how much of the college cost the parent(s) willing to bear, even if it's nothing.

I worked in my first job with a guy who was planning to go straight into college but felt blindsided (basically got kicked out of the house after high school graduation) as his parents refused to provide any support for college costs, even with both of them working as scientists at one of the national laboratories...IIRC, it took him over a decade just to earn a bachelor's degree.

 

[kcowan]

Well, our daughter, age 33, will inherit somewhere between $100K and $12M depending on market performance and our spending over the next 34 years.

Give her the $100k now and say that is all you can promise.

 

[kcowan]

Might just be me but you sound like an engineer looking to plan and, possibly, micromanage life. I'd probably relax the categories and let life happen.

Yes and it is a pretty good high level plan. In fact, I have lived that plan. God willing the $250k will be wildly different. If no LTC issues arise, it will be higher. If not, you might need their help.

 

[JPatrick]

OP, I am kind of old, but would you adopt me?

. .

Get in line...

 

[bclover]

I would encourage more sharing of the college load. I used a 50/50 approach where my sons had to fund 50% through scholarships, work, and student loans. You probably do not need to go that far, but they need to learn good work ethics and budgeting. It is OK for the Bank of Dad to be there for emergencies, but the training for real life needs to start at age 18 and not at age 22 or 24 as a lot of bad habits and good habits can be learned in college. IMHO

lol, I really never understood this. Like if a kid is immature when he enters college having him load up on student loans is suddenly going to mature him.

Different strokes for different folks.

My parents paid my tuition lol and believe you me, I had an extremely clear picture of what would happen to me if I thought about wasting my parents dough.

As my dad use to say "I don't give a damn if your mind is a terrible thing to waste, my money is a terrible thing to waste".

Anyhoo, I footed the bill for my kids college and they pretty much made the normal blow the budget mistakes that everyone makes.

Now me op, I have no plans on leaving them anything. lol, but hopefully when I die folks will look at me in the casket and say "damn, girlfriend live a full, adventurous life".

I also plan on being a burden on them, payback for the teen years.

 

[socca]

Bottom line is, I won't be "setting up" as much as I wanted to and I feel like whale poop over it.

excerpt from a blog: should parents pay for college?

Are parents legally obligated to pay for college?

State law rules that the obligation to financially support your kids ends when the child turns 18. That means parents have no legal obligation to pay for their child’s college education — with one exception. If the parents are divorced and the divorce agreement includes paying college costs, one or both parents are legally obligated to pay for college.

Assuming you stay married, your kids are entitled to no financial support from you after age 18. Any financial support you do provide will be a gift. It's all too easy for the children of wealthy parents to view gifts as entitlements, especially when this viewpoint is accidentally or intentionally encouraged by the parents themselves. This can lead to extraordinarily bad outcomes - I've seen it firsthand on multiple occasions.

I agree with other posts on this thread: your first priority should be to manage your financial affairs so that you don't become a financial burden to your kids as you age. Any gifting you do beyond that should not have any guilt attached ("I wish it were more") - that's not the way gifting is supposed to work.

 

[HFWR]

DS can have what’s left...

 

[SecondCor521]

Somewhere in here I got the impression that part of OP's concern about "is it enough?" is whether it is enough to protect the kids from Bad Stuff.

When kids are younger, I understand that viewpoint. We don't want them to touch the hot stove and burn their finger. We don't want them to run into the street and get hit by a car, or slip under the water in the tub and drown.

When they get older, I think there is value not only in some struggle and unease, but also for significant failures and mistakes. Maybe I'm justifying, but sometimes those experiences can lead to an actual better life than just a smooth easy ride through with no bumps or bruises or detours. As long as my kids aren't dying, losing limbs, or accidentally becoming a parent, everything else that isn't flawless gets logged under "character building life experiences".

 

[pb4uski]

lol, I really never understood this. Like if a kid is immature when he enters college having him load up on student loans is suddenly going to mature him....

DS had a fateful 3 weeks at college playing video games and staying up late before his lack of attention to academic caught up with him and they told him to pack his things and leave... and we got a call from him to come pick him up.

He's doing well now though... working regularly, living on his own and off the dole... and even LBYM and saving pretty good.

Since the prior adventure cost us some, I told him that we will pay for his college if he decides to go, but with a twist.... he pays for the first semester tuition, room & board and books... when he delivers a report card with B's or better in my hand I write him a check for what he paid for first semester, which he can then use for the next semester... rinse and repeat and then the check he gets at graduation can be used to set himself up for his first job after college. He has some skin in the game... don't tell him but I might even concede to him fronting just $5k... that should be sufficient skin in the game to motivate him.

A lot of employees where I worked went to school this way as our company would reimburse college costs as long as you got B's or better.

 

[Tree-dweller]

I think you are giving them too much. They need to learn to do for themselves and will have more pride in whatever they accumulate. In our family, we give you an education and a wedding....My parents were solid upper middle class and we each got 4 years of college paid for (tuition, room & board and books and a stipend for other expenses for the first year only). As a result, I worked part-time during my last 3 years of college... about 20 hours a week for my living expenses... as well as summers. It built a good work ethic..........We told our kids that we would pay for 4 years of college....

You’re a nurturing parent who wants the best for your (still little) kids, but I agree with P; Instilling a work ethic is as important a legacy as the $. For our son we paid 4 years tuition, books, room & board but let him know he was on the hook for his own party money, so he had a succession of PT jobs to that end during school. He told me later that his interviewer for his first job after graduation told him they chose him over others because he had demonstrated his work ethic with his PT work while maintaining good grades.

 

[MarieIG]

I don't have anything set aside for any particular expense. My two daughters will be splitting what is now close to 4 mil when I die. That is unless I change my trust.

And if I had sons, I would make sure they knew that getting married would likely be the way to lose everything.

Are you advising your daughters not to marry and/or giving them advise as to their financial future? (I was an only child. My dad was concerned about my future.)

I only have sons, no daughters.

 

[pb4uski]

I think Mr. Tightwad's point was based on a view that men get hosed more than women in divorces.

 

[ivinsfan]

Somewhere in here I got the impression that part of OP's concern about "is it enough?" is whether it is enough to protect the kids from Bad Stuff.

When kids are younger, I understand that viewpoint. We don't want them to touch the hot stove and burn their finger. We don't want them to run into the street and get hit by a car, or slip under the water in the tub and drown.

When they get older, I think there is value not only in some struggle and unease, but also for significant failures and mistakes. Maybe I'm justifying, but sometimes those experiences can lead to an actual better life than just a smooth easy ride through with no bumps or bruises or detours. As long as my kids aren't dying, losing limbs, or accidentally becoming a parent, everything else that isn't flawless gets logged under "character building life experiences".

That's a great comment and frankly I have no idea why the OP is asking this question.

As parents we helped (noticed I said helped) as in they needed a part time job and to get done in four, unless something unusual happened. Both wedding were shared expenses between the couples and both sets of parents. Anything they have gotten since was because times were good and we felt money for a down payment and such would more helpful to them now then after we were both dead.

I don't even stop to think about what else might be forthcoming after we leave this mortal toil.

 

[ivinsfan]

I think Mr. Tightwad's point was based on a view that men get hosed more than women in divorces.

It's actually SOP for Mr T to bring out the misogyny whenever he sees an opening....

 

[Closet_Gamer]

Hello all....

The opinions i'm about to ask for are just those - opinions in that much of it has to do with personal ethos, and also one's financial picture.

I have young kids....10/6. For variety of reasons I might be retiring within the year at age 43/44. Of course, I wanted to leave much more for my kids in the future - again I know some have different philosophies and that's cool. Bottom line is, I won't be "setting up" as much as I wanted to and I feel like whale poop over it. Ok, here's what I THINK i'll be able to do for kids..... I'd like to know if people think it's good, not enough, great, too much, too little, etc. Of course this is all based on things going good, kids growing up the right way ,etc. (Using today's dollars, let's keep inflation off table just for discussion's sake)

*College

I'd have $75,000 per year for 6 years for EACH kid.

*Weddings

I'd have $75,000 for each kid ready to go.

*Other College Related Stuff

I'd have a *total* of $25,000 for each kid - perhaps for things like a study abroad semester, etc.

*After college is over

I envision $60,000 for EACH kid - towards home down payment, and a little slush fund in their bank accounts.

ALSO...I'd put aside $100,000 for each kid....the idea being they get $350 per month income out of it.....and if needed, it's a $100,000 emergency fund for things like deep recessions, or some of other life's pitfalls.

Inheritance
*********

If all goes as planned, perhaps $250,000 net per kid.


Am I doing right by my kids? Or is this cheapskate city?

Thanks for reading!

You asked for opinions:

I would give them less money early, squirrel away some money for much later, and focus more on their developing work ethic and sense of financial responsibility than the money.

For what it's worth, we saved enough for each kid to go through a private four year school or an out-of-state public school. We're putting the money squarely on the table. They understand it's a fixed asset including understanding their role in selecting a university based on financial considerations, managing college debt and the long term implications of those obligations.

My first daughter is in college now. She quickly fell in love with the idea of a semester abroad. Initially she took and attitude of "I will just borrow more."

That was a short lived and "lively" conversation with her mother.

To her credit, she's now figured out how to do it for the same amount or a bit less than a regular semester.

She spent a bit too much her first semester on pizza (and probably beer). So she put herself on a tight budget, got a job, and is putting 100% of her earnings towards savings so she has spending money on that semester abroad.

A few weeks back, I flipped her $100 for spending money. She was surprise and grateful. She actually tried to give it back...I didn't let her.

If I got hit by a bus tomorrow, this one is good to go. Hopefully we can keep her sister on the same path.

On the flip side, there will be several million left per kid when DW and I croak. We've already concluded that there is an absolute max they will receive (rest goes to charity) and that they won't get it until fairly late in life for fear of screwing them up. Probably a bit along the way, but not too much.

The best gift you can give someone is the skills and confidence to independently live their own life.

My $0.02. You're in great shape and asking all the right questions.

 

[kcowan]

It's actually SOP for Mr T to bring out the misogyny whenever he sees an opening....

Well I am more charitable than that. I think he is reflecting on his own misfortune (missed fortune?). A sample of one.

 

[ivinsfan]

Well I am more charitable than that. I think he is reflecting on his own misfortune (missed fortune?). A sample of one.

Perhaps but the tread subject was, am I leaving enough for my kids and had nothing to do with warning your sons not to get married....

 

[MarieIG]

I think Mr. Tightwad's point was based on a view that men get hosed more than women in divorces.

I can understand that view. Good marriages, are beyond amazing. Bad ones can be devastating.

But, from what I have seen, women can also be venerable to con-men and financially irresponsible spouses.

I am hoping Mr. Tight-wad is encouraging his daughters to be financially savvy and also capable of supporting themselves (on their own if necessary) in the manner in which they wish to live. While he has a responsibility to himself, he also has a responsibility to these two girls who he brought into this world; and it would be expected that they come to him to discuss their perspective futures and/or relationships. It is not easy growing up as a young woman in today's world. I wish both Mr. Tight-wad and his daughters the best.

Fathers are very important to girls (as well as boys). Growing up, I admired my father more than anyone, and he encouraged me and supported me in pursuit of an education and career. But he also instilled in me that women deserved respect.

 

[ivinsfan]

I can understand that view. Good marriages, are beyond amazing. Bad ones can be devastating.

But, from what I have seen, women can also be venerable to con-men and financially irresponsible spouses.

I am hoping Mr. Tight-wad is encouraging his daughters to be financially savvy and also capable of supporting themselves (on their own if necessary) in the manner in which they wish to live. While he has a responsibility to himself, he also has a responsibility to these two girls who he brought into this world; and it would be expected that they come to him to discuss their perspective futures and/or relationships. It is not easy growing up as a young woman in today's world. I wish both Mr. Tight-wad and his daughters the best.

Fathers are very important to girls (as well as boys). Growing up, I admired my father more than anyone, and he encouraged me and supported me in pursuit of an education and career. But he also instilled in me that women deserved respect.

And it's not just the money that makes it devastating ..yet things are changing and if a person wants to make a statement that if you have money and don't want to lose any of it, don't get married, that's your right. But when you say it's a male only thing, that's when it goes South. So yes would he tell his DD not to marry, that's the question.

 

[MarieIG]

I just reviewed your first post. Did you mention that your son has mild autism? I think you need to see how he does as a young adult before deciding upon his eventual requirements. A special needs trust may come into play.

 

[2177V]

I believe in helping children as much as possible.....and not wait until you are dead so they can inherit your wealth when your children are in their 50's or so.

My daughter was going to college when she got married. My wife and I decided to buy a retirement house with RV parking and a swimming pool for ourselves. We wanted to give our existing house to them. The feds will impose a gift tax if the gift is more than $15K per person per year. This translate to $60K per couple to couple per year so my CPA advised us to give them a "family loan" based on the market value of the house. We can then subtract $60K per year from the balance of the family loan.

To make the family loan legal, I have to charge the "applicable federal rate" which is about 1% less than the banks and I have report the interest that I earn on my federal taxes. This is OK since I have the cash flow. My daughter and my son-in-law will never have to pay rent to a landlord, pay a mortgage to a bank or wait until I die.

My point: You have to be aware of the federal gift tax limitation before giving your kids some of your wealth to enjoy. Talking to a CPA on the federal tax laws is also advisable since they only charge about $100 an hour consultation. $100 is small compared to $250,000 or my house that now belongs to my daughter and her husband.

 

[svalder85]

For us
1) all three finished state school with no debt
2) a decent, but old car to get them started
3) we've always contributed to IRAs whatever they earned in high school and college, and have matched their IRA contribution after.
4) one wedding with 250 people, our half was $15000.
Second wedding with 35 was $4000. But they need help with immigration process, so we will compensate as needed.
5) we dont agree yet on inheritance. I more prefer to help them with the things that worry you when you are young. Saving for college, retirement, taking a nice family vacation (nothing like a free beach vacation when you have little kids). I think that helps much more than receiving $500000 when they are 70 years old.
6) and most importantly to model to them generosity in giving and service to the needs of the greater community.

 

[steveark]

That's very generous. We would have paid 4 year degrees but all three got free rides. Weddings, maybe 10k each but only son is married and he eloped. Starter money was 10k each. That's it and we are multimillionaires. All three will get millions after both my wife and I die. They are on their own until then.