Opening up the dialog to give money to my kids

[qwerty3656]

I've always had in the back of my mind that I would give my kids some money. I guess I always thought it would be something like help with a down payment on a house. They are mid to late 20's, not married, have good jobs and rent. I've never said anything about giving them money and I'm starting to think maybe I should say something. Do I wait til they get married? Do I wait til they have kids? Do I give them money now with no strings attached (example of "string" - this is for a down payment on a house)? Do I wait til they reach a certain age (e.g. give the older ones money but wait on giving the younger ones money)?

 

[Jerry1]

I guess I’d want to understand better why you want to give the money now. Along with that, what do you think they’ll do with the money?

For example, if you just want to give them money and they’re doing fine on their own maybe you could fund a Roth for them. I’ll grant you that it is a lot easier if they’re buying a house or getting married. Then you have a reason to give and an experience to enjoy beyond just writing them a check.

 

[qwerty3656]

I guess I’d want to understand better why you want to give the money now.

Well I've read alot of things that suggest waiting til I die for them to inherit the money in their 50's is not very helpful.

edit: most of my money is in a Roth now, so it wouldn't do any good for me to fund their roth

 

[Retire2023]

It would still benefit them for you to fund a Roth. If they inherit the Roth, they have only 10 years to empty it, but if you fund a Roth in their name, it can grow for the rest of their lives.

 

[punkinhead]

I have two grown children in their 20's. One is married with a newborn and the other is single. I give them both money by contributing to brokerage accounts that I set up when they were younger. My intent is to help them build up a house down payment but once I give them the money it's there's to use as they see fit. If they need the money in an emergency I'd be fine with them using it. I wouldn't be happy if they were spending it on frivilous things but so far they've kept it growing in the brokerage and both have been contributing to it themselves. I've also been funding a 529B for our grandson. I don't see that marriage plays a role. When they're young and first launching is when they need help the most.

 

[qwerty3656]

It would still benefit them for you to fund a Roth. If they inherit the Roth, they have only 10 years to empty it, but if you fund a Roth in their name, it can grow for the rest of their lives.

Between my wife and I, one of us will likely live another 40 years. Funding their roth vs keeping it in our is not going to matter.

 

[qwerty3656]

When they're young and first launching is when they need help the most.

That's my thinking. My only hesitation is I think it would ideally grow tax free in my Roth until the time they plan to spend it.

 

[Jerry1]

Between my wife and I, one of us will likely live another 40 years. Funding their roth vs keeping it in our is not going to matter.

Generational wealth. Imagine the impact of keeping that money untaxed for a couple generations or more.

In more current terms, you’re giving them something, which is your stated objective, but since they have no immediate need for it, it can at least grow tax free until they need it - like for a house . . .

Otherwise, focus on experiences. Offer to take them on a great trip or start vacationing in a great place every year as a family tradition. I have family that get a house in Destin Florida and spend a week there every year. It’s grown into quite a gathering now with the adult kids and grand kids.

 

[aja8888]

I'm 81, and have a married daughter and no grandchildren. I am giving her the money now and have been for a decade or so to get the two of them where they are today. She has a paid off house and no debt. Her husband is quickly moving to full disability due to deterioration of his brain from Hydrocephalus onset (took 7 years). So they basically lost 1/2 their income due to his inability to work and probably their health insurance soon.

I know mine is not the normal case with children, but $hlt happens.

 

[Car-Guy]

It was easy for me. Just one DD. The DW and I have been giving the max to her that is allowed under the gift tax laws (currently 18k each for a total of 36k yr). We've been doing that for a ~decade now with no strings attached. We did buy her a house a few years ago "too" and filed form 709 for that year since that was over the limits for non reportable. Sort of nice to see it doing some good before we kick the bucket.

 

[Kings over Queens]

We've been watching a private equity investment grow over the last 9 years that will be significant for us once it monetizes. Our conversations over that time have been in line with what I read in die with zero. We've had discussions with our adult children (3 under 30) about what we want to do with the money, and by that I mean, how we want to share it and make investments in their lives.

So yes, first thing, have a discussion. figure out what's important to you, but to them too. Example, our daughter is fiercely independent and resists gifts. I had to "sell" her on why we were going to buy her a car, and still, 18 months later, she brings it up despite me reminding her that she earned it and there are and never were any strings attached. I'm sure your kids, like mine, have different personalities, so figure out what they would feel comfortable accepting. Not everyone welcomes a gift.

Again, in our case, once the PE deal hits, my immediate plan is to purchase cars for the other two, and potentially houses for 2 of the 3. One of them lives home when he isn't away working, so him having his own house makes no sense. For the other 2, I'll purchase it in an LLC, and they will pay the taxes, utilities, etc, and a small rent to the LLC to legitimize the transaction. Wife and I will be the members of the LLC and will gift ownership shares over time to Irrevocable Trusts for them, to protect the asset and other future assets from bad marriage's. I see this as a step to developing generational wealth.

I only offer that as an example of what can be done, it's your money.

 

[Flyfish1]

Do I wait til they get married? Do I wait til they have kids? Do I give them money now with no strings attached (example of "string" - this is for a down payment on a house)?

Personally I'd wait a bit. Odds are they will either get married or buy a house or both. I held off and gave the first daughter a nice wedding and a decent chunk of money to buy their condo. Second daughter will also get the same deal with a little inflationary increase. Also, no need to have that conversation yet in my opinion.

 

[Slim11]

Just make sure that whatever you do its even as to not create animosity between them. So don't give one more then the other. Otherwise, go for it if they are responsible.

 

[cathy63]

I've always had in the back of my mind that I would give my kids some money. I guess I always thought it would be something like help with a down payment on a house. They are mid to late 20's, not married, have good jobs and rent. I've never said anything about giving them money and I'm starting to think maybe I should say something...

I think you should tell them what you're thinking. We recently told our DD that we would be able to help her buy her own place, thanks largely to an inheritance from her grandmother. DD lives in a VHCOL city doing a job she loves, but it doesn't pay a lot. She told us that for her, owning a home seemed so far out of reach that she had never even considered it. Your kids may be in a similar situation and need to be told it's is a possibility before they will start thinking about it.

 

[skyking1]

I think you should tell them what you're thinking. We recently told our DD that we would be able to help her buy her own place, thanks largely to an inheritance from her grandmother. DD lives in a VHCOL city doing a job she loves, but it doesn't pay a lot. She told us that for her, owning a home seemed so far out of reach that she had never even considered it. Your kids may be in a similar situation and need to be told it's is a possibility before they will start thinking about it.

that's a good point. Sometimes it is hard to imagine the possibilities.

 

[rk911]

Seems to me that the deciding factor is if the money will have strings attached. If yes then the timing of the gift is 100% dependent on the string. If not then make the gift at a family gathering (or not) and rest easy,

 

[SecondCor521]

I would start having conversations with them now. It'll help you process your feelings and opinions about giving. It'll enable you to convey any education or training or strings or values you want to attach to the gifts to them. It'll give them time and space to emotionally prepare to receive the gifts. It'll give everyone a chance to get the logistics and specifics figured out and learn about the various tax aspects to gifting.

I started in generalities when my kids were young. I also started with smaller gifts to see how I and they handled it. I tried to increase it a little bit every year; just recently I took a look and some numbers indicate I might "need" to give more to reduce estate taxes. So I think about that.

Two of my kids are savers and one is a spender. I give to them equally. I try to get the two savers to spend a bit more and the spender to save a bit more. That's a work in progress.

I do both general gifting - here's money for whatever - and targeted gifting - here's money I hope you put in your Roth IRA. And I do reserve the right to make future gifts or not based on how they use the existing gifts. Although there is wide latitude there - as long as they're not committing felonies with it I'm probably OK.

 

[street]

Nothing wrong to give them the money now or later. I think it depends on the kid, and you know them best.

So, if I may ask what ballpark number you are wanting to give them.

 

[Exchme]

We waited until the kids were in their 30s, mostly because we didn't feel financially secure until then.

I put together several pages of financial thoughts, touching on boglehead investment principles, how they need to take the long term view in spite of the emotions and hunches they will have about the future of the market, insurance they should have and bad financial products they should avoid, how costly advisors are, notes about taxable, tax deferred, HSAs, 529s, Roth accounts, etc. How our bequests are likely raise their tax brackets, so they should be doing Roths and more.

We told them we wanted 1-2 hours to talk about money stuff. When we sat down, we gave them a check and that got their attention and we went through the document. They took notes, asked questions and asked me for help in setting up some accounts.

We've given cash every year since, but I've cut back to part time, meaning no extra cash anymore, so this year we will be giving shares of ETFs. We told them we may stop giving at any time and for any reason, so they shouldn't be penciling in the money - though in reality, we likely will try to do something each year.

 

[Texas Proud]

It would still benefit them for you to fund a Roth. If they inherit the Roth, they have only 10 years to empty it, but if you fund a Roth in their name, it can grow for the rest of their lives.

This is what I have been doing for my DD... but I also make her fund half of it...

I have not helped out DS as we had a disagreement when he was in college and I paid a year for him to keep his GF in his apt... I have been thinking about sending him $10K a year or so and say it is for him to put in a ROTH...

BTW, he is now married to GF and both have great jobs and bought an expensive place in Seattle...

 

[FlaGator]

I'm 81, and have a married daughter and no grandchildren. I am giving her the money now and have been for a decade or so to get the two of them where they are today. She has a paid off house and no debt. Her husband is quickly moving to full disability due to deterioration of his brain from Hydrocephalus onset (took 7 years). So they basically lost 1/2 their income due to his inability to work and probably their health insurance soon.

I know mine is not the normal case with children, but $hlt happens.

Not normal, but not unknown. You have my sympathy and appreciation for your compassion and ability to keep their lives as normal as possible.

My situation has some parallels - my oldest was hit with a number of hard to diagnose ailments that have left her unable to work no more than a few hours a day at best. Only 23 years old and had been healthy and energetic before, working through HS and first few years of college. Managed to finish the Master's degree, but not able to spend enough hours on her feet to support herself. Now looking for alternative part-time work that can be done at home, all the time hoping this corrects itself soon. In the meantime, still on my payroll, and that is sustainable at the current frugal level. We're fortunate I'm able to do that. Not the life she or I hoped for, but you play the hand you're dealt and play it hard. For better or worse, we have prior experience with that.

Now that I'm single again, my planning has shifted to ensuring the oldest can have a reasonable life and both my kids have enough after I'm gone to be "comfortable enough". All while I do the same in the meantime. No longer waiting until 70 for SS .

To the OP issue - The late wife and I put money in 529s while the kids were young and their college has been paid for without loans. Also established Roth IRAs for both as soon as they started working, with me making the contribution each year. We put enough money in the 529s early and there will be enough left over to cover most if not all of house down payments for both. Yes, ended up being overfunded and the kids' academic work earned them scholarships that helped a lot.

Their late mother and I were a team that built what I have today, and I see anything more than what I need as "family money" to help build the next generation. But always have to be mindful of instilling a good work ethic and not creating dependency or sense of entitlement.

 

[Sunset]

Well I've read alot of things that suggest waiting til I die for them to inherit the money in their 50's is not very helpful.

edit: most of my money is in a Roth now, so it wouldn't do any good for me to fund their roth

Somewhat wrong.
Funding their Roth, especially if they don't have one will:

1. Start the 5-year clock on Roths so they don't run into that limit as some people do later in life.
2. Show them that a Roth grows totally tax free (after the 5 year rule issue).

 

[donheff]

I funded Roth's for both kids when they were starting out. I also helped both with mortgage downpayments.
They both live nearby in a HCOL area and housing would have been a challenge without the help. I also help our daughter with daycare. She is a teacher, and her husband is in a similar paying occupation, so they are stretched pretty thin. We didn't go overboard while they are/were young for two reasons: we didn't want to spoil them; and we wanted to be sure we remained fully independent if the economy went south.

Now we are pretty much in the final stretch and will have large RMDs that we don't need for day-to-day costs. We plan to sit down and go over the now or later question with the kids soon.

 

[Taxman59]

DW and I both lost our Mother last year. We each inherited a fair amount. Given what the market has done in the past few years (I have purchased a home near the coast, taken the family on several vacations and still have more that I retired with 9 years ago and I start SS in January!), we decided to share a portion of the inheritance with our 3 DS. I explained that the money ($30k each) was not likely to be repeated. My oldest (he is the $$ type) said its going into the college funds for the GCs. The middle asked at what level should he open a brokerage account (I said either Fido or use the advisor I use who will household his account with mine and therefore no fees except for trading costs). The youngest said thank you, and he would put it into a savings account (he is my spender of the three). DW and I expect to make annual gifts to the GCs , and occasional gifts to the DSs as the market allows.

 

[pjigar]

We give "matching gift" to DD for every dollar she contributes to her IRA/Roth IRA. We will extend the benefit to 401k contribution once she is eligible for 401k. You can give up to $18K per parent to son/daughter without any gift tax. The "matching gift" has several benefits:
1. Inheritance start happening now there by saving room for eventual estate tax exemption.
2. DD gets in a habit of regular investing. DD gets to enjoy the magic of compounding over time.
3. DD can have her cake (money) and eat (invest) it too!

PS: We do have strings attached to the gift that DD can't withdraw money from the retirement accounts and she has to provide annual statement to prove it.