That's a great incentive and really helps your daughter plan her future.That is our strategy once DD has a W2 job: Gift appreciated shares in kind to her brokerage amount. The gift only comes if she contributes equal amount in Roth IRA. I call it 100% match from Bank of Dad.
Just being having this type of conversation with our daughter this week. She is in the middle of a 17 week paid sabbatical and absolutely loving it so she is hoping to retire in 7 years at age 50. We have been gifting enough money for a few years now every month to her and her brother to bolster their retirement savings so they can retire in their 50s like us should they choose to do so. If we make it to anywhere near our life expectancy then any big inheritance will arrive when they are in their 60s or close to it.Is gifting your children yearly Roth contributions a better strategy than leaving them a big inheritance?
I think it is. However, your children can only put into the Roth the amount they earn up to a maximun of $7000. I'm gifting taxable ETF funds directly into DS's taxable account at Schwab. He pays taxes on the capital gains if he sells, but it gives him quick access to funds if needed, such as a down payment on a house or a new car. I never have to pay capital gains, and right now he is in the 12% tax bracket so he will pay nothing unless he sells a lot of the funds.
So for us, that is a better tax strategy for all of us. We have more in the taxable account than in the IRA.
The gift allowances shouldn't be an issue since funding even $7K would not require reporting.It's a strategy... But I didn't think you can make a blanket A is better than B judgement.
There are lifetime gift allowances to be considered.
Age of the kids to be considered.
I "matched" my kids' Roth contributions when they got W2 jobs. I'll do that through college (both are still in college). This is to encourage them to contribute to their Roth's.
I also plan on helping them with part of their diem payments on their first homes... Roth doesn't help there.
Does he list you with "per stirpes"? If so, then it would fall to your offspring. If not, wouldn't it go to the other beneficiaries (unless you are sole)?I've done both the Roth matching and current gifting, which I am ramping up. I also am fairly confident that I will disclaim some of my inheritance from my Dad to my three 20-something adult offspring because of the reasons listed above.
As mentioned above, this isn't a big deal. In essence, it reduces your tax-free inheritance once you pass. Unless you're close to the limits at time of death, this has no effect.But I already max out the gift limit before having to report gifts.
Does he list you with "per stirpes"? If so, then it would fall to your offspring. If not, wouldn't it go to the other beneficiaries (unless you are sole)?