Gifting with a warm hand

[ncbill]

"Gift" is a four letter word in my family. To quote my late grandfather: "You'll get my money when I'm dead!". To his credit, there was considerably more money at his passing than 30 years prior.

DW and I do help our nieces and nephews and have paid for their college and we're now down to buying baby clothes as gifts for the new arrivals, but we have no plan for early disbursements.

Yep, despite all his promises dad turned out to be like that as well.

Which is why I gift with a warm hand.

Already gifted the kids the annual limit when in undergrad, just did the same amount for the one who got married, also committed to substantial help for downpayment for first home.

But beyond that told them all no commitment since as others have posted the best gift I can give to them is to not to be a financial burden on them.

 

[Sunset]

Yes I do try to help our kids now rather than when I am gone, 200K at 30 would be my choice for sure but it never arrived and neither did the 500k at 50. There are so many people suffering in the World, just look at recent events in Morocco and Libya. A few hundred $ is all it takes to help a couple of families out.

I don't donate to those, as I would only gift/donate to someone I actually know and directly to them.
I believe donating to far off places means the money ends up in corrupt officials accounts and at best after paying bribes/fees/etc by corrupt officials/criminals that only 10% ends up with a person in need.

The funding of the corrupt officials/criminals encourages them to create more devastation/hardship to generate more donations, so worsens the lives of people trying to live there.

 

[Sunset]

.....We feel that one of the biggest gifts we can give to our kids is not to be a financial burden to them in our later years. ..

Exactly....
Plus we have no idea of our needs/cost in the future.

I entered the world with no financial back-stop, so I had to succeed.

My cousin, got handed money, cars, a tiny business venture, by his parents all though his life. I really feel it contributed to his incredible lack of motivation to do anything other than laze around, and forget about any serious employment.

 

[RE2Boys]

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.

+1

I struggle with over gifting can put a negative mindset for young people.

For my mid 20 year old sons (I'm over 70), to date I insured that they graduated college with no debt. They each had a nominally priced used car during college to keep, and I gave each a $15K graduation gift, explain that this was start-up money to help getting settled in an apartment wherever they found employment. Cash flow can be tough while trying to get those first few paychecks. Now they need to learn to plan their own financial life.

I have continued to encourage them savings in a Roth IRA since their first W2 job at age 15 by matching their contributions (usually a $3k match per year). Seriously considering upping the contribution to $6.5k this year as I can easily afford it.

 

[Sojourner]

Did you get gifted money with a warm hand?

No, nothing extravagant. My parents did pay for my college education, but it was at a state school back in "the good old days" when college costs weren't astronomical. I think it cost a grand total of about $700/semester for tuition and maybe about $300/month for dormitory residence. Plus, I had various scholarships that helped pay a portion of the freight.

Do you want to gift your heirs money earlier so the impact is bigger?

Nope. All my money will pass to my DW when I'm gone, and then she can give it as she sees fit to whichever "heirs" she thinks are most in need, most worthy, etc.

If you were given say $200k at 30 or $500k at 50 which would you take?

Well, of course I would have taken the $200k at age 30 if I'd been offered it. I would have saved and invested it, but that's just me. I think most 30-year-olds would actually be harmed, over the long term, by receiving that kind of windfall. That is exactly the age where you should be really hitting your stride in your career, working super hard, trying to get promotions and "climb the ladder", etc. A big cash gift could easily cause one to take their foot off the pedal, so to speak, and feel like they can just "coast".

 

[statsman]

I have read through this thread, and I feel a bit sad reading some of the responses. I guess each parent has to make a judgment about their child's/heir's ability to handle any gifting at an early adult age. Maybe we're just lucky with our only kid.

We saved for our kid's college education. When the invoice arrived (room & board, tuition) for the first quarter in college, our kid was both stunned about the amount and concerned about our ability to pay for it. We indicated we had saved up for a Bachelor's degree program. Our kid promptly finished the Bachelor's program in three years plus the following summer, saving us nearly 25% of the planned college expenses.

After 6+ years of working, our kid and future spouse decided to purchase a house. They had enough saved for the 20% down payment on a 30-year loan, most of it our kid's savings. But the lender was concerned about not leaving enough in savings for any future house expenses (they found a very clean two-year old house). DW and I gifted up to the limit to partially backfill their savings. Doing so gave them peace of mind, plus it convinced our kid to continue paying into their 401(k) plan to at least receive the maximum match amount.

The past two years has seen them get married, one changed to a better job (spouse), and our kid receiving a promotion and very nice pay raises. The house they purchased turned out to be a good one, and the 3 1/8% 30-year fixed loan is looking real good right now.

If given the choice, with *our* kid, we would gift again. No regrets, and no sense that we've damaged our kid's ability to make life and money decisions. If our kid were to have received $200K at age 30, which was earlier this year, I have no doubt they would handle the money in a responsible way.

 

[athena53]

We saved for our kid's college education. When the invoice arrived (room & board, tuition) for the first quarter in college, our kid was both stunned about the amount and concerned about our ability to pay for it.

When I took my son back to NY Military Academy for his sophomore year, he looked over at the check I was writing ($12,000 and this was back in 2000). He said, "It costs that much to send me here?" "Yes", I said. "And you're worth it." It was a really good example of an "extra" provided when it was needed. I shudder to think of where he'd be if he'd kept falling through the cracks in the public school system. I doubt that any amount of money I threw at him now (he's 38) would help.

My Ex, OTOH, inherited $300K from his mother when she died in 1983. He was 36. We did use $100K as a house down payment but the rest went for toys for him (a new Camaro, a $6,000 sound system, a $7,000 Jaeger-le-Coultre watch, expensive fishing equipment, deep-sea fishing charters) and what was left helped pay part of the household expenses during the years he was unemployed- till it was gone.

It really does depend on the kid. His sister and her husband were highly successful entrepreneurs and very sensible with money. Same parents.

 

[brett]

Yes, we have gifted. No issue whatsoever.

IMHO there is no right or wrong amount or time frame Purely a personal financial decision depending on the situation.

 

[Exchme]

We've been giving to our kids for the last few years, up to the gift tax exemption. Our kids are frugal but have the kind of jobs where big incomes will not be in their future. We decided that having them live on a shoestring their whole lives and then get an inheritance a few decades from now would not be as helpful as getting some now.

We wanted them to make their investing and tax mistakes now. We figured it best that they learn how to resist FOMO when markets soar and panic when markets tank while there was only relatively small amounts of money at stake and they were young enough to make good life-long investing habits.

We had confidence they would respond well and not start loafing or filling the driveway with jet skis. So far, so good.

We found it is an annoyance to give in cash as we end up having to sell stock and pay capital gains. To make that our kids' problem, we will start gifting some lots of our index funds. That can be a balancing act as to what to which lots to give.

Giving shares with large gains is foolish as we would never need to sell those and they would get a step-up basis when we pass, so giving those just creates an extra tax bill. Giving shares with the smallest gains would work, but then when we need to sell something, we would have larger gains and our capital gains rate will be higher than theirs. So I'm making a guesstimate of how much we might ever need to sell, mentally reserving that for us and giving from lots with the next higher gains.

 

[aaronc879]

I am not in the position to gift anyone lunch let alone 6-figures but I would rather get $200K at 30 than $500K at 50. If I was a retired multi-millionaire then I would do the annual gift limit every year rather than a 6-figure lump sum. Unfortunately most people do not give or receive such large gifts myself included. I will inherit half of a $100K house and a few grand at the most.

 

[mystang52]

We are fortunate in that both of our kids are doing well, financially, so they certainly don't need our $$$. But we do send a monthly amount to each of our 4 grandchildren's 529. And that amount is triple what it was when we first started doing so a few years ago.

 

[pacergal]

We have gifted small amounts to our two kids since retirement, but certainly not in the hundreds of thousands! Our big spend is on experiences with family, such as yearly summer vacations together. We have gifted some $ towards home down payment, college loan payments.
My concern is making sure we have enough to get us through the end of out lives, LTC if needed.
If all goes as hoped and planned, and investments do well, they will have a comfortable, but most likely not extravagant , retirement.

 

[athena53]

We wanted them to make their investing and tax mistakes now. We figured it best that they learn how to resist FOMO when markets soar and panic when markets tank while there was only relatively small amounts of money at stake and they were young enough to make good life-long investing habits.

We had confidence they would respond well and not start loafing or filling the driveway with jet skis. So far, so good.

I feel the same way. DS says that whatever they inherit will be held for the kids (yeah, they could change their mind) so last year I gave each of my granddaughters $1,000 in a UGTMA account. I gave them some possible investments; one chose Starbucks and the other chose Costco. Costco is up and Starbucks is down but nothing alarming. I'll be adding to that and having them decide whether to add new, sell, or whatever. Little brother is only 4 but will eventually be brought into it. I want them to learn early with small amounts and, as you mentioned, it gets the investment income $$ out of my name and into theirs. I know it will get taxed at the parents' rate but it won't be much.

 

[Route246]

Brother and I plus each wife was gifted the max from my father who was directed by his CPA to drain off some cash holding enough for LTC and other contingencies. Total came to about $140K each. We put ours into Vanguard and it grew to about $220K. Brother and his wife did not. Only way I know this is the look of shock on their faces when I told them we put it into Vanguard and kept it in the event of an emergency for Dad. Also note, their income was probably higher than ours for the bulk of our adult lives, they just chose to live slightly above their means and we lived slightly below our means and out incomes are pretty high, even in NorCal.

When my father was in hospice we paid all of his LTC out of that $220K, mainly to show my father that his cash accounts (which I was managing) were increasing monthly with his SS payments. He asked me who was paying his LTC and I told him it was out of the gifts he gave us a decade prior. He told me to make sure I get compensated for this after he dies and I told him not to worry. We did this because he was extremely financially insecure being a veteran of the Great Depression. I told my brother we would pay and settle up when the estate was dispersed and brother agreed to this. Dad's mental well-bring and not being stressed about LTC was more important than growth in the Vanguard holding. His peace of mind was priceless, it is one of the very few things I can take to my grave with a huge smile on my face. The gift has been restored and continues to grow at Vanguard.

I believe that fact we saved our gift is an outlier in the US. My brother did not save it and I believe that is the vast majority of behavior for middle-aged adults who have elderly parents who gift to the kids before they die. I like to think that even if we could have used that gift money that we would not have unless it was something important like education, medical or other expenses. I think many spend it on vacations, remodeling, redecorating, etc. That's OK with me, I'm not judging as plenty of people probably think I'm crazy for saving it and not spending it on some pleasurable outcome.

 

[athena53]

I believe that fact we saved our gift is an outlier in the US. My brother did not save it and I believe that is the vast majority of behavior for middle-aged adults who have elderly parents who gift to the kids before they die. I like to think that even if we could have used that gift money that we would not have unless it was something important like education, medical or other expenses. I think many spend it on vacations, remodeling, redecorating, etc. That's OK with me, I'm not judging as plenty of people probably think I'm crazy for saving it and not spending it on some pleasurable outcome.

Many of the clickbait articles I read have to do with inheritances- no surprise. One pair of siblings inherited stocks. Sibling A sold it and spent the $$$. Sibling B kept it invested and made a killing. Sibling A claimed that Sibling B owed him "his" share of the profits.

I'd told Dad that whatever he left me would go mostly to the grandchildren's education and he was very happy with that. Some is going for family travel, too. Nothing extravagant but we're going to Charleston, SC in May- flying there, rented Airbnb. Dad would like that, too.

 

[SecondCor521]

I posted earlier positively about gifting to my kids.

I realized after reading the other responses that I did skip over a lot of the conditions for me doing so: having enough for myself (I do), making sure they don't view it as EOC/entitlement/guaranteed income (they don't), etc. I pretty much agree with everyone's comments; I think @athena53 articulated things well on this thread.

One other wrinkle for me is I have three kids - two are savers and one is a spender. I've decided to give to them equally but then also try to educate them as well, giving tailored advice - the spender needs to save more and the savers need to spend more. Sometimes I'll do incentives like matching what they put in their Roth IRAs. In the big scheme of things they're all doing well even as I try to nudge them more towards what I see as a good balance.

 

[MarieIG]

So many here retired early with substantial amounts.

Did you start gifting money to your heirs? Did you get gifted money with a warm hand? Do you want to gift your heirs money earlier so the impact is bigger?

If you were given say $200k at 30 or $500k at 50 which would you take?

I think $200k at 30 would have been more impactful and helpful.

I have no desire whatsoever to gift $200,000 to a 30 year old.

I paid for my kiddos education, tutors, sports, used cars, car insurance, and everyone had room and board for as long as they wanted it. In addition to birthdays and Christmas, gifts were given in conjunction with starting Roths and weddings. I will probably give Son #3 something towards a down payment when he buys a house. We are helping with the grands in particular as one is special needs. And - gifting comes in colors other than green.

My current financial priority is covering our health care expenses in old age.

My parents paid for my high school, undergrad, a very reasonably priced wedding (we had eloped and I was willing to go without a formal wedding, so in any event, a budget wedding was my cup of tea).

When we bought a house my parents gave us 10k towards a downpayment. DF paid for the kiddos summer camp. After DM passed DF bought me a new Honda (as he was tired of seeing me come home on a tow truck - we lived across the street).

If I had the choice of 200k at 30 or 500k at 50 (such as a lotto type win) I am not sure what I would have done. But - I would not have taken 200k from my parents at age 30.

(At one point, I did refuse a large cash gift offered by DF to get us out of a financial bind as I thought it would be better for us to handle it ourselves. And guess what, we did.)

 

[livingalmostlarge]

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

 

[Time2]

So many here retired early with substantial amounts.

Did you start gifting money to your heirs? Did you get gifted money with a warm hand? Do you want to gift your heirs money earlier so the impact is bigger?

If you were given say $200k at 30 or $500k at 50 which would you take?

I think $200k at 30 would have been more impactful and helpful.

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.

 

[street]

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

I also know that some inherit 7 figure amounts.

 

[aaronc879]

I also know that some inherit 7 figure amounts.

They are referred to as lucky sonsofb**ches.

 

[RenoJay]

So many here retired early with substantial amounts.



Did you start gifting money to your heirs? Did you get gifted money with a warm hand? Do you want to gift your heirs money earlier so the impact is bigger?



If you were given say $200k at 30 or $500k at 50 which would you take?



I think $200k at 30 would have been more impactful and helpful.

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.

 

[street]

They are referred to as lucky sonsofb**ches.

You got that right partner. Lol

If I would have gotten a larger money gift. I would have a hard time spending that gift. A gift is something to keep and I would have invested it and would still have that gift today but would be a bigger gift.

 

[Koolau]

You got that right partner. Lol

If I would have gotten a larger money gift. I would have a hard time spending that gift. A gift is something to keep and I would have invested it and would still have that gift today but would be a bigger gift.

Heh, heh, as long as there is land around you, street, you'd have no problem of disposing of money!!

 

[street]

Heh, heh, as long as there is land around you, street, you'd have no problem of disposing of money!!

That might be true, Koolau. Lol

I never stop looking just about every day I'm checking for land.