Kids and inheritance

[livingalmostlarge]

This is a terrible question to ask but did anyone gift a house down payment or just substantial amounts to their child/children and then they got divorced? What happened to the money or home? Did you care?

Also did anyone ask their child to get a prenup because of what they planned to leave to them?

 

[RetiredHappy]

I am not worried about gifting sums of money to them before they get married. Most states, if not all, treat assets before marriage as separate and not part of community property. I think gifting when they are married is trickier. I have gifted about half a million dollars to my son, between his brokerage account and balance of the cost of his home so that he did not need to get a mortgage. If he does get married, that half a million dollars will be treated as separate property.

 

[Koolau]

I never worried about it. It's their lives and If I choose to give to them, it is totally without conditions (One exception: I fund the kid's Roths sometimes and I ask them not to take money out of them.) After 10+ years, no problem and the Roths are doing well for them. (It's an early step toward THEIR FIRE experience.)

 

[disneysteve]

My mom gifted us 10K toward our down payment in 1994. Fortunately, we're still happily married 30 years later. Had we divorced at some point, I guess my ex would have gotten half of that amount as part of her share of the house.

We haven't reached a point where this is an issue yet with our own child as she's not in a relationship. I suppose I will likely talk to her about a pre-nup before things get too serious since unless we burn through a bunch of money with long term care needs, she is likely to inherit a 7-figure amount when we're gone.

 

[Jerry1]

When we bought a house for DD we put our names on the house. I guess if they’d have gotten a divorce, he might have got 1/2 of her 1/3. Fast forward about 10 years and we gave them the house. He’s been a good husband, dad and son in law. If they divorce now, he’s earned his half.

 

[CardsFan]

We have not gifted anything substantial, beside their wedding gift, and it was "only" $10k. If we gift more, there will be no strings.

Regarding asking for a pre-nup, I guess that is one way to ensure you start out on the wrong foot with the new bride/groom.

DS will likely inherit a sizable sum when we are gone. We will leave it to him to decide how to handle it, hopefully in 10-20 years.

 

[Route246]

When we married I immediately put everything in joint accounts and joint ownership, she did not reciprocate but she didn't have much savings at the time and I had just bought my house. I guess it showed her some good faith and she probably had not forgotten that gesture. Had we divorced I was willing to give up 50% as I view something like divorce a 50-50 problem. I asked a good friend who knew her family and knew her and he told me she would be a good wife so I took him at his word and everything has worked out. I remind her today that she has 50% of our assets if she ever wants out which is a decent amount where she would never have to worry about where her next meal is coming from.

Regarding warm hand gifting which is what giving a down payment is, it should be done with no strings attached or it should not be done at all, in my opinion. If a deadbeat spouse takes 50% in a divorce then I feel I have failed in a way along with our child. If I detect any sense of a gold digger son or daughter in law then I'll just have to be more careful.

 

[Texas Proud]

I agree with the above... if you want to help out your kids then help them out... do not get involved with their love life...

If they get divorced that is their business... if THEY lose half their house etc. that is no skin off of your teeth... just let it go..

 

[ncbill]

same here...down payment assistance for all the kids, though I told them all that's all they can count on until we're gone.

 

[Aerides]

Also did anyone ask their child to get a prenup because of what they planned to leave to them?

I would say no one should even think about this.

It says "hi, new DIL/SIL, I don't trust you and I don't want you to benefit from our gift if the marriage fails, even if it's our kid's fault"

Way to set them up to fail, imo.

At best, way to set yourself up to be the least favorite grand parent down the road.

 

[kcowan]

I never worried about it. It's their lives and If I choose to give to them, it is totally without conditions (One exception: I fund the kid's Roths sometimes and I ask them not to take money out of them.) After 10+ years, no problem and the Roths are doing well for them. (It's an early step toward THEIR FIRE experience.)

Exactly like our approach. The kids need to decide how to manage their finances and our contributions just add to the pot. Similarly the five GC education funds must be used bad intended.

 

[pacergal]

We gift all kids/inlaws the same, now and in the past. We offered $25,000 towards house down payment when they were ready.
DS was married first, they were looking for a house, but did not qualify for a mortgage (both just out of school) at that time. Marriage went south shortly after with a financially disastrous outcome for DS. DS so glad they did not get a house at the time! His down payment money is still in the bank for him when he is ready.
DD and DSIL used their $, have a lovely townhome and still happily married.

Any monetary gifts we give are given without strings, it is their decision how to save/spend/use.

 

[Car-Guy]

I gifted my DD a new house and "she" was smart enough to get a written agreement with SIL that the deed would be in her name and that she would keep the house, in case of divorce. Fast forward a few years, they divorced and she kept the house as per their agreement.

 

[Time2]

I funded an IRA for a SIL, turned out he was either having an affair or started one soon after. My daughter found out through a friend of a friend and she divorced him very quickly after. It all worked out for the best.

 

[athena53]

Never occurred to me, maybe because I honestly believe DS and DDIL have a true "'till death do us part" marriage. DS bought his first house as a bachelor with a down payment from $$ left in a UGTMA his Aunt set up that had funded half his college education. After he married and they were expecting a 3rd child they bought a bigger house and I gifted them $15,000. Never occurred to me to put any conditions on it- she's a good wife and mother and if they ever did split I'd want her to have enough to get back on her feet.

I guess I was on the receiving end of the story- bought first house with $100K that the Ex put down from an inheritance but we shared household expenses till the last 5 years when he was unemployed and I paid them all. I got 40% of the $200K equity, all the investments in my name and no child support and considered myself lucky. I remained on good terms with his family. They understood the multiple reasons I walked away and I think they respected me for taking full responsibility for our 12-year old son, making a sensible investment in another house, and carrying on.

I think it's a harder decision when big bucks are involved- like gifting a 20% down payment in an area where a starter house in a decent school district costs $800,000. A cousin of my Ex apparently gave her ex-husband more than he deserved from the equity in the house just to get rid of him.

 

[MarieIG]

As it stands now, I would not gift an entire down payment - kiddo has to have skin in the game.

If I decided to gift a portion of a down payment to a child already married, I would not have any stipulations beyond that it go towards the down payment.

I have not spoken to any of my children regarding pre-nups.

 

[Wetfly93]

This is a terrible question to ask but did anyone gift a house down payment or just substantial amounts to their child/children and then they got divorced? What happened to the money or home? Did you care?

Also did anyone ask their child to get a prenup because of what they planned to leave to them?

I do not think this is a bad question at all. My son and his girlfriend purchased a home together then got married and quickly got divorced. We urged our son to get a prenup because my cousin lost 1/2 of her Ira after a brief marriage. We wanted anything left to our children to be held separate. Safeguard against what could happen. Her parents wanted a prenup to protect her assets.
As with most premarriage couples there should be a lot of talking about finances and how each addresses debt and savings. A prenup allows each party to see all assets. This can cause some issues especially when the couple split expenses 50/50 and one of the pair is a saver while the other is in debt.

I have no doubt the prenup was needed but in hindsight he should have required the engagement ring to be returned. This girl told him the night they got married she wanted out. It was all about the party and gifts. But in Florida if they go through the ceremony then she gets the ring even if she returns it to her husband prior to the finalization of the divorce. She could walk out of the house not pay her portion of the mortgage or bills and not be required to do anything. The mortgage was obtained when they were single so each had an obligation. A prenup safeguards existing retirement and savings accounts and makes each party responsible for their own debt. My son went with this girl for over 10 years.

 

[CardsFan]

I do not think this is a bad question at all. My son and his girlfriend purchased a home together then got married and quickly got divorced. We urged our son to get a prenup because my cousin lost 1/2 of her Ira after a brief marriage. We wanted anything left to our children to be held separate. Safeguard against what could happen. Her parents wanted a prenup to protect her assets.............

Yeah, but the OP was talking about a pre-nup to cover assets that might be inherited in 10, 20, 30 years.

 

[FlaGator]

Interesting to see the responses. Some were not specific about how much $$ they provided, some disclosed amounts more akin to a car loan. And some just objected to any parental influence on found money for their offspring.

The OP asked about a few different scenarios for a kid's pre-nup - house down payment or similar and future inheritance. Those are different things to me, plus there is a materiality threshold I would consider.

Easiest first - for a future inheritance, no I wouldn't demand a pre-nup. Too many unknowns. My age at death, how much I've spent on hookers, blow and home health care on my way out the door . My kids understand what happens if I leave tomorrow, and they're both too prudent/frugal to just give it up if their relationships go south. They also have good advisors they have known for years to call on. Plus, I'll be gone, and if I can care, there won't be anything I can do about it.

Along the way while I'm alive, different approach, and here's where the materiality threshold comes in. If I give $10K to a new in-law to pay off student loans when their money is otherwise managed prudently, not going to worry about what might happen down the road. Clean start as a young couple, etc. OTOH, if that gift still leaves $10K on their credit card debt, not doing it. Pay off the credit cards first, then come to pappa.

Moving up the materiality ladder, if I give $50K or more for a house down payment, I'm going to make sure my kid gets the benefit of that if things go bad. That amount would be an advance on their inheritance, and I will influence that as long as I can. Doesn't have to be a pre-nup (with all the drama that entails), but it needs to be clear, and legal.

 

[robnplunder]

I believe my life is too short to worry about such things. Besides, kids these days can take care of such issues better than I can worry about.

 

[marko]

I would say no one should even think about this.

It says "hi, new DIL/SIL, I don't trust you and I don't want you to benefit from our gift if the marriage fails, even if it's our kid's fault"

Way to set them up to fail, imo.

At best, way to set yourself up to be the least favorite grand parent down the road.

Like so many discussions here, a lot depends upon the amount of money involved.

$10k-$20k-$50k? Don't worry about it. But when you start getting into high six or seven figures, inheritances and such, a pre-nup is not only essential, but likely expected on both sides. Marriage is a legal contract as well as an emotional one.

It sure saved my bacon the first time around, but even then, (despite post #2) a long expensive legal battle can follow.

A well drafted, fair pre-nup can also provide protections for both parties, spelling out remedies should either side be at fault. Most also have time limits where certain conditions can become null after X years. [Insert my friend's funny/sad story here where his own prenup kept him in line]

Most times it has nothing to do with "trust" but simply facing the reality that over time, relationships can change, outside forces can interfere and life in general is unpredictable.

 

[levindb]

We just made a change with our inheritance plans. Instead of gifting to our 3 children, we will bypass them and gift to our 6 grandchildren...plus they have to be at least 30 years old to receive the gift. This bypasses the issue of divorce in the children, but there is still the potential for divorce in the grandchildren that is not addressed.
While we are alive, we can be a financial safety net if it is needed...fortunately, all the sons are doing vey well financially.

 

[Aerides]

A well drafted, fair pre-nup can also provide protections for both parties, spelling out remedies should either side be at fault. Most also have time limits where certain conditions can become null after X years. [Insert my friend's funny/sad story here]

I would totally agree that pre-nups are often a good idea, for many marriages. As a discussion initiated by the couple.

BUT, where I disagree, is the idea that the parents should ask for one as a condition or result from a gift. Were I that prospective spouse, I'd take that as a sign to expect overbearing in-laws who didn't really trust that anyone was good enough for their little jimmy/sally, etc.

 

[marko]

I would totally agree that pre-nups are often a good idea, for many marriages. As a discussion initiated by the couple.

BUT, where I disagree, is the idea that the parents should ask for one as a condition or result from a gift. Were I that prospective spouse, I'd take that as a sign to expect overbearing in-laws who didn't really trust that anyone was good enough for their little jimmy/sally, etc.

OK. But maybe the parents know their little Jimmy's weaknesses lot better than his fiancé does....as noted a good prenup can protect both parties...and help keep Jimmy in line. $50k? No worries. The bigger the money, the bigger the problems.

 

[rembrandt]

We just made a change with our inheritance plans. Instead of gifting to our 3 children, we will bypass them and gift to our 6 grandchildren...plus they have to be at least 30 years old to receive the gift. This bypasses the issue of divorce in the children, but there is still the potential for divorce in the grandchildren that is not addressed.
While we are alive, we can be a financial safety net if it is needed...fortunately, all the sons are doing vey well financially.

An elderly couple was asked why they are getting divorced at 90 years old. They said they wanted to wait until the children died.