How to gift to Children ??

[Gallaher]

I recently read that the average inheritance lasts about 17 months.
Just checked google, the answer was average of 2-4 years. Either one is shockingly short.
In fairness, there is no mention of the size of the inheritance. Ten grand would go pretty fast.
Nor is there mention of the disposition of the inheritance. No one would argue with paying off debt or buying a house.
Maybe ask your kids what they would like.
Mine would want a lump sum today.

 

[OddGuy]

This is very timely for me, as I'm struggling with the "warm hands" approach and actually regretting having started doing it.

Initiated the $18k to each + spouse + kid just last year, and having a big issue that one child and spouse are not only not appreciative, but exhibiting signs of disrespect, contempt and exclusion of us from their family plans, like we're just here to finance a boost in lifestyle while they condescend. It's very upsetting and a real headscratcher, but I guess it's valuable to discover people and relationships aren't what you'd thought.

Currently strategizing the most diplomatic way to pull back on this without them going ballistic and no-contact out of spite - mid-term plan is to transition to a "cold hands" approach where they as 30's adults have to wait for their payoff, (which will be considerable when the day arrives) but our grandchild will continue to have his 529 fully funded by us (which of course helps them as an expense they don't need to worry about...not sure if they even get that...)

 

[Gallaher]

This is very timely for me, as I'm struggling with the "warm hands" approach and actually regretting having started doing it.

Initiated the $18k to each + spouse + kid just last year, and having a big issue that one child and spouse are not only not appreciative, but exhibiting signs of disrespect, contempt and exclusion of us from their family plans, like we're just here to finance a boost in lifestyle while they condescend. It's very upsetting and a real headscratcher, but I guess it's valuable to discover people and relationships aren't what you'd thought.

Currently strategizing the most diplomatic way to pull back on this without them going ballistic and no-contact out of spite - mid-term plan is to transition to a "cold hands" approach where they as 30's adults have to wait for their payoff, (which will be considerable when the day arrives) but our grandchild will continue to have his 529 fully funded by us (which of course helps them as an expense they don't need to worry about...not sure if they even get that...)

We are living parallel lives.

 

[Koolau]

I recently read that the average inheritance lasts about 17 months.
Just checked google, the answer was average of 2-4 years. Either one is shockingly short.
In fairness, there is no mention of the size of the inheritance. Ten grand would go pretty fast.
Nor is there mention of the disposition of the inheritance. No one would argue with paying off debt or buying a house.
Maybe ask your kids what they would like.
Mine would want a lump sum today.

Oh, yeah. College friend ca '68 got a pretty good sized inheritance from his grandfather. Since he was just 21, the inheritance was set up that he could only receive a chunk of it each year for several years. His first purchase? A '68 Corvette! By '70, he had bought a Z28 Camaro.

I lost track of him when we went our separate ways after graduation so I don't know how long his money lasted but he was easily spending half a professional j*b salary on cars each year.

This experience was instructive when our kids were in college and out on their own for the first time. I had a rule that there would be no gifts toward cars but maybe for a house.

 

[OddGuy]

We are living parallel lives.

Do please expand, if you are inclined to do so.

DW and I spent hours today sharing our interpretations of a recent weeklong family trip where these microaggressions were made repeatedly, and it had me questioning the whole deal.

I've always heard you shouldn't give money that causes people to do harm, and I feel that giving these two an extra $36K (plus $18k in 529) in their budget is allowing them the freedom to dishonor their parents in a multitude of little jabs and parries.

 

[Lewis Clark]

DW and I spent hours today sharing our interpretations of a recent weeklong family trip where these microaggressions were made repeatedly, and it had me questioning the whole deal.

I've always heard you shouldn't give money that causes people to do harm, and I feel that giving these two an extra $36K (plus $18k in 529) in their budget is allowing them the freedom to dishonor their parents in a multitude of little jabs and parries.

If I were treated the way you describe by someone to whom I had given a substantial gift (of any type), then I would never give them anything ever again, either as a warm-hand gift or a cold-hand gift.

People do not deserve an inheritance just because there is a blood relationship.

 

[Koolau]

This is very timely for me, as I'm struggling with the "warm hands" approach and actually regretting having started doing it.

Initiated the $18k to each + spouse + kid just last year, and having a big issue that one child and spouse are not only not appreciative, but exhibiting signs of disrespect, contempt and exclusion of us from their family plans, like we're just here to finance a boost in lifestyle while they condescend. It's very upsetting and a real headscratcher, but I guess it's valuable to discover people and relationships aren't what you'd thought.

Currently strategizing the most diplomatic way to pull back on this without them going ballistic and no-contact out of spite - mid-term plan is to transition to a "cold hands" approach where they as 30's adults have to wait for their payoff, (which will be considerable when the day arrives) but our grandchild will continue to have his 529 fully funded by us (which of course helps them as an expense they don't need to worry about...not sure if they even get that...)

Do please expand, if you are inclined to do so.

DW and I spent hours today sharing our interpretations of a recent weeklong family trip where these microaggressions were made repeatedly, and it had me questioning the whole deal.

I've always heard you shouldn't give money that causes people to do harm, and I feel that giving these two an extra $36K (plus $18k in 529) in their budget is allowing them the freedom to dishonor their parents in a multitude of little jabs and parries.

This is something only parents (or those donating to others) can decide. My take? I don't expect groveling thankfulness for gifts - even "big" monetary gifts. I WOULD appreciate at least a card or personal thank-you. BUT I would NOT reward a sense of entitlement to future gifts OR micro aggressions. As long as it's your money, you have at least some responsibility to gift it wisely and in a way that elicits appropriate behavior from the recipient. Just like when your kids were little, you withheld "privileges and rewards" when behavior didn't meet your expectations. Just because the kids have "grown up" (aka gotten older) doesn't mean they have any right to your money or your approval of their behavior.

Yeah, you might not do Christmas or Thanksgiving with the kids for a while , but if you have to "buy" their love, then is it really love??

Sorry you are going through this. I hope the kids come around. They are still capable of learning (learning, for instance, that mom and dad are also people who deserve respect and thanks). Blessings

 

[OddGuy]

This is something only parents (or those donating to others) can decide. My take? I don't expect groveling thankfulness for gifts - even "big" monetary gifts. I WOULD appreciate at least a card or personal thank-you. BUT I would NOT reward a sense of entitlement to future gifts OR micro aggressions. As long as it's your money, you have at least some responsibility to gift it wisely and in a way that elicits appropriate behavior from the recipient. Just like when your kids were little, you withheld "privileges and rewards" when behavior didn't meet your expectations. Just because the kids have "grown up" (aka gotten older) doesn't mean they have any right to your money or your approval of their behavior.

Yeah, you might not do Christmas or Thanksgiving with the kids for a while , but if you have to "buy" their love, then is it really love??

Sorry you are going through this. I hope the kids come around. They are still capable of learning (learning, for instance, that mom and dad are also people who deserve respect and thanks). Blessings

Thanks so much. Yes, they've already started to weaponize time with our grandchild, like if we call them out on what would be unacceptably rude remarks if they made them to anyone else (like their friends or coworkers) they'll react by arranging the grandchild spends time with the other GPs.

It's a dance every parent knows (and as you say, it's a pattern that can emerge as a 3 year old or a 30 year old) but it all comes down to "We will not negotiate with terrorists."

And yes, I don't expect groveling, but I do expect "Hi, just confirming we got the $36k you sent. Thanks!"

 

[marko]

If the nest egg is substantial, I've always been a fan of a trust that metes out a set amount on a quarterly basis. Enough to maybe cover a heavy mortgage, but not enough to deplete the funds or create "moral hazards" to the recipients .

That way, changes could be made in the event of LTC, "disrespect" issues, divorces or other unforseen eventualities. Mom and dad maintain control of the spigot, but a helping, warm hand is there.

Then, done right, the trust could live on in perpetuity to grandchildren and great grandchildren.

I've also been an advocate of raising children early on, bringing them slowly into understanding the expectations and responsibilities of inherited money rather than just suddenly dumping a large sum on them.

 

[SecondCor521]

Thanks so much. Yes, they've already started to weaponize time with our grandchild, like if we call them out on what would be unacceptably rude remarks if they made them to anyone else (like their friends or coworkers) they'll react by arranging the grandchild spends time with the other GPs.

It's a dance every parent knows (and as you say, it's a pattern that can emerge as a 3 year old or a 30 year old) but it all comes down to "We will not negotiate with terrorists."

And yes, I don't expect groveling, but I do expect "Hi, just confirming we got the $36k you sent. Thanks!"

Passive aggressive misbehavior (your first paragraph's description), groveling, and acknowledgement of a gift are all on separate behavioral continents.

I'm brave when it comes to other people's kids, but I'd like to think if I were in your shoes I would discontinue gifts to them. I would also have a frank discussion and articulate exactly what behavior(s) needs to stop and what behavior(s) need to start.

They may course correct back to healthy interactions, or they may go off the rails. But that will be their decision; if you have had a clear conversation with them then I think your conscience could remain clear.

 

[Koolau]

If the nest egg is substantial, I've always been a fan of a trust that metes out a set amount on a quarterly basis. Enough to maybe cover a heavy mortgage, but not enough to deplete the funds.

That way, changes could be made in the event of LTC, "disrespect" issues, divorces or other unforseen eventualities. Mom and dad maintain control of the spigot, but a helping, warm hand is there.

Then, done right, the trust could live on in perpetuity to grandchildren and great grandchildren.

I've also been an advocate of raising children early on, bringing them slowly into understanding the expectations and responsibilities of inherited money rather than just suddenly dumping a large sum on them.

The concept of a trust has always sounded like a potential way to accomplish what I want to have happen once I'm gone. Having said that, I don't know enough about trusts. I know they are expensive. Our kids had a trust from their grandparents but the (expletive deleted) trustee took 4% for doing virtually nothing but quarterly reports and writing 3 checks. I called them several times and they agreed to lower their ridiculous fees but they never did. I had no ability to make them comply with their promises. The minimal research I've done on trusts has found similar issues of cost. Then, too, once I'm gone, how do I insure that a trust actually complies with my wishes and the instructions within the trust.

I'm not saying "no" to trusts but I think they may have "issues" to w*rk out if one goes that route. YMMV

 

[Luvtoride]

Yes, these are first World problems as CalBird stated.

I feel badly for those whose generosity is shunned or resented by their kids or their spouses or viewed as buying favor for access to grandkids. Everyone’s family dynamics are different and money can’t change (or maybe worsens) those relationships. We have friends who want to be helpful and generous to their kids and grandkids but their in-laws families on both sides are so wealthy that their attempts to help out seem like token gestures.

I’m not sure if the OP is looking for additional “tax-saving”/ wealth transfer opportunities or other ways to assist their heirs. We are certainly not in the same wealth bracket as some others here but we have found some ways to help our kids/ grandkids by:
- an annual family vacation that we pay for such as a cruise or trip to a Caribbean location during Christmas or other school breaks. These types of vacations would stretch the budgets of their families but are appreciated and provide great bonding time for all especially the cousins relationships with each other.
- we pay for summer camp for our 3 oldest grandkids (4th is only 3 but will be included when she gets a bit older). We have the camps (sleep away for the 2 oldest and day camp for our younger grandson) send us the tuition bills directly. This assures great summers for the kids and is a financial relief for our daughters and SILs.

We are fortunate that’s these acts are helpful and appreciated by our families and that we can afford to do so. I’m sure as college gets closer we will find other ways to help out as well.

 

[gauss]

The concept of a trust has always sounded like a potential way to accomplish what I want to have happen once I'm gone. Having said that, I don't know enough about trusts. I know they are expensive. Our kids had a trust from their grandparents but the (expletive deleted) trustee took 4% for doing virtually nothing but quarterly reports and writing 3 checks. I called them several times and they agreed to lower their ridiculous fees but they never did. I had no ability to make them comply with their promises. The minimal research I've done on trusts has found similar issues of cost. Then, too, once I'm gone, how do I insure that a trust actually complies with my wishes and the instructions within the trust.

I'm not saying "no" to trusts but I think they may have "issues" to w*rk out if one goes that route. YMMV

If all the kids (along with any other trust beneficiaries) agree, couldn't they fire the trustee and hire one more appropriate?

I was under the impression that "irrevocable" trusts could be modified if there is 100% agreement among the beneficiaries.

Regarding the trustee complying with your wishes, I am anticipating the following strategy:

1. Use a Corporate trustee such as Charles Schwab or Fidelity - not a sole practicing attorney or administrator with no real oversight.
2. Ensure that the beneficiaries understand (via written instructions also verbally reviewed with them) what is expected under the Trust and how to take action (either legal or trustee change) if compliance is not occurring.

I think there are others here that know more about this than I do and would welcome their insightful comments.

-gauss

 

[Koolau]

If all the kids (along with any other trust beneficiaries) agree, couldn't they fire the trustee and hire one more appropriate?

I was under the impression that "irrevocable" trusts could be modified if there is 100% agreement among the beneficiaries.

Regarding the trustee complying with your wishes, I am anticipating the following strategy:

1. Use a Corporate trustee such as Charles Schwab or Fidelity - not a sole practicing attorney or administrator with no real oversight.
2. Ensure that the beneficiaries understand (via written instructions also verbally reviewed with them) what is expected under the Trust and how to take action (either legal or trustee change) if compliance is not occurring.

I think there are others here that know more about this than I do and would welcome their insightful comments.

-gauss

The good news is that within 3+ years, the kids had drained the trust for school expenses.

I don't know if the kids could have fired the trust leaches or not. I sense that most trusts are a license to steal from clients but I don't know that for a fact.

 

[Kings over Queens]

On the relationship aspect of gifts and kids, we've been very deliberate in explaining why we've given so far, and what and why we plan to do in the future.

Tale of 3 adult kids. Middle (son) and youngest (daughter) graduated college at the same time. They did it smart (community + 2 year state program at the community) and worked hard. The deal was I'd front the money, they pay half on installment post graduation. Over dinner celebrating their graduation I told them I was waiving the payment plan, all debts forgiven. Middle kid smiles as he's processing what just happened, daughter is incensed. "Why would you do that?!" "I planned to pay you back!" On an on. I had to assure her that she earned the forgiveness and that her paying me back was more detrimental to her future financial future than helpful to mine. She had the money and could have easily just written a check, but why? Keep it invested and let it grow was my advice.

She finally came around, but the response was in stark difference to the middle kid. The oldest just said, it's ok Dad, you can just give me what ever you saved by me NOT going to college. He's got the most money of all of them.

We've approached the topic of gifting very deliberately. Our plan to share what we can (warm hands) and we've explained to the kids why. Still, it takes constant reassurance that these gifts don't come with strings. Otherwise, they aren't gifts.

 

[donheff]

We talked to our two kids aged 52 and 40 about this. Both agreed that we should forgo the gifts for now, for different reasons. Our son (52) is saving now and would save what we gave him. A bump up to market value later would be better economics. Also, we could pop for tuition as his three kids start college in a few years. Our daughter is at an income level that supports a 50% tuition break for our granddaughter at the pricey private school where my daughter teaches. Large gifts would go into investment accounts that would potentially reduce the tuition break.

 

[Koolau]

On the relationship aspect of gifts and kids, we've been very deliberate in explaining why we've given so far, and what and why we plan to do in the future.

Tale of 3 adult kids. Middle (son) and youngest (daughter) graduated college at the same time. They did it smart (community + 2 year state program at the community) and worked hard. The deal was I'd front the money, they pay half on installment post graduation. Over dinner celebrating their graduation I told them I was waiving the payment plan, all debts forgiven. Middle kid smiles as he's processing what just happened, daughter is incensed. "Why would you do that?!" "I planned to pay you back!" On an on. I had to assure her that she earned the forgiveness and that her paying me back was more detrimental to her future financial future than helpful to mine. She had the money and could have easily just written a check, but why? Keep it invested and let it grow was my advice.

She finally came around, but the response was in stark difference to the middle kid. The oldest just said, it's ok Dad, you can just give me what ever you saved by me NOT going to college. He's got the most money of all of them.

We've approached the topic of gifting very deliberately. Our plan to share what we can (warm hands) and we've explained to the kids why. Still, it takes constant reassurance that these gifts don't come with strings. Otherwise, they aren't gifts.

One of our adult kids always "asked" for gifts (house down payment, etc.). Another asked for co-signing for a business loan (which would have put us on the hook for who-knows-what - so we gifted a set amount instead). Third kid never asked for so much as a stick of gum.

They are all different and they all think differently and have different expectations of a family relationship. Viva la difference, I guess.

 

[EastWest Gal]

I actually have a secure message into Vanguard to find the best way to do something similar with my adult son.

I had been contributing the max to his Roth IRA each year, but his income is getting higher so that's not the best idea anymore. My plan is to transfer/contribute to his taxable brokerage account instead, going forward.

I'll see what Vanguard's answer is soon but would be interested if anyone else has done this.
I think I would prefer a printed form with his name and acct # on it, but not clear if they do that nowadays...

I've been gifting ETF shares to DS for several years. I had him set up a taxable account at Schwab. There is simple paperwork to transfer shares and/or cash from one Schwab account to another. I send the form with a note stating "this is a gift from me" or "this is a gift from <DH>". I do two separate transfers of just under the reporting limit each year. DH has had a coupe years of being underemployed, so he has sold some of the shares then later reinvested them to capture the capital gains. It's a real tax win for him-his income was low enough not to pay capital gains taxes but high enough to not go on Medicaid. His NW is $250K at age 34. No debt.

 

[oscar1]

Really surprised at the responses here. Granted if you are wealthy, the kids well off, it’s kind of moot (focus on experiences). But if your kid was a teacher for the first 5 years, struggled with student loans, buying her first new car, got married and is now in a fixer upper house, maybe different perspective. Should we pay for an HVAC update for their house, or a new fence. Answer is probably yes but do I want to deprive them of the satisfaction of doing it their way on their terms. If the parents are always giving hand me outs, how will the kids learn the character building of hard work and the satisfaction that comes with that. Paying for everything might make us older people feel like we are helping but do the kids really want it? The only thing you learn from being given free money is where to turn to the next time you need something. Wanted to offer another perspective.

 

[Kings over Queens]

Wanted to offer another perspective.

It's a valid perspective and something we've considered. Our view is that if they haven't developed the character you describe by now that they are adults, we've got other issues to deal with.

We were tough on our kids and required them to pay for things with money they earned at jobs. Want a cell phone, you pay for it. Daughter likes the popular yoga pants the kool kids are wearing...ok, we pay for the basics, you pay the difference. Car insurance, car payments (shared expense)...you get the drift. All three worked during high school and 2 of the 3 were also varsity level in their chosen sports.

As adults all three have money in their Schwab accounts and roth ira's. We've made it clear that any gifts they recieved were things they earned, and any future gifts were contingent on them continuing down the right path.

 

[street]

Really surprised at the responses here. Granted if you are wealthy, the kids well off, it’s kind of moot (focus on experiences). But if your kid was a teacher for the first 5 years, struggled with student loans, buying her first new car, got married and is now in a fixer upper house, maybe different perspective. Should we pay for an HVAC update for their house, or a new fence. Answer is probably yes but do I want to deprive them of the satisfaction of doing it their way on their terms. If the parents are always giving hand me outs, how will the kids learn the character building of hard work and the satisfaction that comes with that. Paying for everything might make us older people feel like we are helping but do the kids really want it? The only thing you learn from being given free money is where to turn to the next time you need something. Wanted to offer another perspective.

We feel the same but not shaming or disagreeing with any that give how they feel fit.
We did give out son money for a home when he was about to get married. He had a brand new home he bought on his own and she had a home. The only reason we helped on this second home was to bridge from buying a new home and trying and time wise to get old home sold. In the end we let him keep the money we gave him for the bridging period.

He is one also that has never asked for any help in any of his dealings.

 

[rkser]

We ultimately decided to transfer gift ETFs $15k to each kid’s spouses.

They can keep VTI & VXUS invested (default option) in their Brokerages as we have or sell them, pay the Cap Gains Tax & blow the dough.

No strings attached.

 

[Koolau]

Really surprised at the responses here. Granted if you are wealthy, the kids well off, it’s kind of moot (focus on experiences). But if your kid was a teacher for the first 5 years, struggled with student loans, buying her first new car, got married and is now in a fixer upper house, maybe different perspective. Should we pay for an HVAC update for their house, or a new fence. Answer is probably yes but do I want to deprive them of the satisfaction of doing it their way on their terms. If the parents are always giving hand me outs, how will the kids learn the character building of hard work and the satisfaction that comes with that. Paying for everything might make us older people feel like we are helping but do the kids really want it? The only thing you learn from being given free money is where to turn to the next time you need something. Wanted to offer another perspective.

I see your point and I'm not sure how to answer - except for me.

I just remember what it was like when we (DW and I) first started out in the 70s. I had a good j*b but we watched as house prices were rising faster than we could even save for the down payment. Mom and dad stepped in and bought a house and let us buy it on contract from them. They gave us an upfront "gift" to help pay the first couple of years payments.

Now, would things be different had they not done that? No way to tell, but it took some pressure off of us. To this day, even after they've been gone for 30 years, I still bless their names and I try to "be like them" when it comes to our kids. I want our kids to "struggle" but I do not want them to be discouraged. Big difference and YMMV.

 

[statsman]

This is something only parents (or those donating to others) can decide. My take? I don't expect groveling thankfulness for gifts - even "big" monetary gifts. I WOULD appreciate at least a card or personal thank-you. BUT I would NOT reward a sense of entitlement to future gifts OR micro aggressions. As long as it's your money, you have at least some responsibility to gift it wisely and in a way that elicits appropriate behavior from the recipient. Just like when your kids were little, you withheld "privileges and rewards" when behavior didn't meet your expectations. Just because the kids have "grown up" (aka gotten older) doesn't mean they have any right to your money or your approval of their behavior.

Yeah, you might not do Christmas or Thanksgiving with the kids for a while , but if you have to "buy" their love, then is it really love??

Sorry you are going through this. I hope the kids come around. They are still capable of learning (learning, for instance, that mom and dad are also people who deserve respect and thanks). Blessings

I've observed too many instances where adult children are expecting gifts from their parents, and they become annoyed when the gifts don't arrive on a certain, usually yearly, schedule. These children start pulling away unless they are "bought", especially if they believe they are locked in as the inheritors of their parents' estate.

Some parents will start to honestly assess their relationship with their adult children, and many find out it isn't as close as they thought it was or would like it to be. That's a tough situation to be in, especially if there are grandchildren involved.

 

[TheWizard]

We ultimately decided to transfer gift ETFs $15k to each kid’s spouses.

They can keep VTI & VXUS invested (default option) in their Brokerages as we have or sell them, pay the Cap Gains Tax & blow the dough.

No strings attached.

No stepped up basis when you do that, of course.

My plan is to give excess cash that otherwise would go into my taxable brokerage account.
Perhaps not as much as some folks would give, but retaining the already invested ETFs for eventual stepped up basis...