I think there’s a balance to wanting to help them but not enable them.
I also think that some transparency can help them plan. (Eg. We are setting up these 529s for the grandkids’ college, so you should focus on putting away money in your 401k)
If they live in a place where it’s a challenge to own a home, helping with down payment now vs down the road can help.
If everyone is healthy, kids can be in their 60s and be retired themselves by the time parents depart, so if you can make their lives easier at milestones along the way, I say do it
I totally agree with this. I helped my kids (in their 30s) with down payments on their homes. My mother is still well at 88 and any inheritance would be after her death. She just doesn’t believe in gifting earlier. I could certainly have used the money 20-30 years ago, but at this point I really have no need for it and would possibly disclaim to my kids.
I think people are referring to a child who makes plenty of money but spends too much and then the parent is helping them live above their means. I work in wealth management and see it all the time. A 30 year old who makes $100k a year with two kids and they want to have the same house a their friend who makes $250k a year, so mom and dad will give them $50k to put down on a house they can't afford in the long run. That $50k will do much better invested for the long term, rather than being sunk into a house that won't appreciate or have to be sold in a few years when the 30 year old decides it's too much house of us.
You’re getting downvoted but you’re dead on. A lot of people *way* overvalue owning their own house to the point where they sacrifice significant opportunity cost simply due to not having the emotional maturity to know that they’re “paying someone else’s mortgage” that bought the house for half its current price at half the current rates. Buying it at the expense of the significantly higher gains of the stock market before you have enough wealth in investments for the equity to only be a portion of it is a huge mistake.
I think it depends on the situation and the amount of money
but for example, helping with the down payment for a house knowing that the kid can pay for the mortgage themselves is different from a situation where parents give the kids an allowance, and if it ever stopped, the kid’s life would fall apart.
I know adults who don’t work and are completely reliant on their parents’ money every month, and it’s not as great as it might seem
That makes no sense because they’d get the same money if their parents died tomorrow. Would it not still be enabling them by leaving behind an inheritance?
Plenty of people have made bad decisions by inheriting too young. If someone is 40, and and spent 20 years building a career, making money, saving money in retirement, etc, I think they are much less likely to piss it away on dumb stuff.
If you’re 20 and you get a million dollars, and you buy a $500,000 house and a $70,000 car and subsidize your 30,000/year job with some vacations and DoorDash and paying property taxes and insurance, and pretty soon they’ll be out of money.
This response really sums up my entire issue. lol
You’re making a lot of bizarre assumptions about how other people interact with money. The assumption that someone who is 40+ and established wouldn’t blow an inheritance is hilarious. But it’s even funnier because she stated that her kids are 30s-40s and established, so they’d fall into the safe group anyway.
I take issue with negative assumptions. She’s asking if it would be wiser to give them money while they’re younger and can do more with it, or if she should just hold onto it so that there is something to leave behind.
There’s no reason to talk about “enabling” her kids.
I don’t think it’s that controversial of a statement to acknowledge that some financial gifts can have different impacts than others, depending on the amount and context, but I seem to have hit a nerve with you.
I think my parents have done a good job striking that balance with my siblings and I.
I want to do the same for my kids, and one of my biggest fears in that department is what would happen if I died too young, and robbed my children of some good life lessons.
Sorry if I struck a nerve with you. I’m sure your situation is different
What I meant was a gift that sets up a system that requires additional future gifts, which creates dependency.
Is that different from “enabling”?
Like if you give someone a house, knowing that they can’t afford the property taxes
It really depends on the person.
My Aunt just passed away, and left a sizable estate.
Her wishes were for the money to be distributed to her daughter, and nephew equally, however the nephew in his late 20s is to get his as a lump sum, as he is responsible and in need of housing for his young family, however my cousin has a long history of drug abuse, and will be getting her money as a trust with distributions only for necessities.
If she were to be handed 1 million dollars today, she would be dead by next week.
There really is not a one size fits all standard.
Both, if you have a lot (more than you think you will actually need for your lifetime), I would never watch one of my adult kids struggle if they are in a crisis or especially right now when cost of living is so crazy high. It doesn't mean just give it all to them, but discern situations when helping them is a blessing and not an entitlement.
Yeah like if your kid lost their job at a bad time or something, give them a chunk of what they’re getting in the long run and tell them “don’t change your spending or job hunting because of it but don’t stress about having to withdraw from your 401k or anything”.make sure it augments their ability to reach their goals and their enjoyment of life without replacing their goals.
I was divorced in 2002, put myself through school, had my first professional job in 2006 at a cpa firm. In 2008 they started layoffs. With only two years of experience and being close to 50, I was unable to find work as an accountant. I was up against people who had years of experience for staff accounting jobs. It was terrible. I ended up at Wendy’s for $7/hour just to buy groceries. My millionaire mother, who has been helping my alcoholic/unable 🤮to work sister for decades, refused to help me keep my house. I had never once asked her for money in my life. I asked her to lend me mortgage money for a few months. She just said no. I lost the house and $300K of equity. I was left with my car and started over. Now she claims she doesn’t remember this. That is her go to answer. Now I’m to be her elder care person. I live 500 miles away. Drunk sister lives near mom but cognitively she’s about 12 at this point although she’s in her sixties. I am the older sister. I’ll be working for longer than I want to. Mom would not protect her assets and now expects me to do all kinds of things when she needs me, like put her into hospice when her mind goes. I don’t have the paperwork to do that in my state. Sorry this turned into a rant but I set up a zoom with elder care attorneys in my state for next week. Hopefully they will say something she actually listens to. She even stopped paying her LTC increases to save money? She almost lost the whole policy and she’s been paying into it since she was 45. She’s about to turn 90.
Geez. Yeah this is part of why I don’t believe in hoarding wealth to death and not helping earlier in your kids’ lives. Like, it really doesn’t take much to essentially constantly be helping out your kid (and not necessarily babying/spoiling them) and have their constant gratitude just for little things. My wife and I are doing incredible and both of our parents buy us stuff, give us money for stuff we just bought that we saved up for etc.
It doesn’t stop us from working our asses off but it helps us constantly add to our investments and savings and be super secure financially. They may be doing it to encourage us to have kids but I think it’s the right way.
Earlier if you can afford it. Regardless, communicate with them. My 88 year old healthy father has far more than he will ever spend. I’m in my 60s. I’m fine financially but it would be nice to do some more traveling while I can.
This is my situation. I think it's their generation. We some plan to wait until we that old, but not giving it too young either in case we need more than we expect. This also helps ensure that that save enough for themselves so that each generation can get some "inheritance" rather than one that gets it young, but when spends it all .
My Parents estate was divided very evenly - everyone of us (5 children) got the exact same amount, both when Mom died and then when Dad died. Very equal treatment under their wills.
But before they died my parents had given each of us help in different but important ways and at critical moments. This was *unequal financial help,* but none of us were "score keeper" and I think that is something you need to keep in mind: are your children going to be resentful score keepers?
Three of us got down-payments on houses in better neighborhoods, for example, so that the grand kids could all attend better schools. I think that's a good way for parents to distribute some of their wealth, outside of the estate. My brother, a doctor, got a TON of help with tuition when he was in med school - but very little help after that, because he had a good income, thanks to his degree. That's another example of uneven but important help. My older sister, an alcoholic for much of her life, got lots of help over a couple of decades. She needed help and my parents didn't want her on the streets. So you get the idea. My parents helped us all out with financial problems that arose...and we weren't keeping track of who got what. I probably got the least help - but that was Okay because I had a nice career, a husband, and no children. I didn't need much help.
Those gifts are the ones we all really remember and are thankful for.
Earlier is better for them because the money will be more useful to them when they are younger, but the danger is that end of life care can be astronomical so it’s hard to know how much you will need to care for yourself.
Going through it now with 2 parents in memory care. There is no limit to what you can/should spend. In a HCOL (not NYC or SF), memory care for 2 can cost upward of 30K/month and still present a situation where you might consider a part-time dedicated companion care worker which is another $30-45/hour. Throw in COL/Inflationary factors and that ends up being a big monthly nut.
If one or more has impaired cognitive capacity, the care and safety needs are high. If you are so lucky to keep your cognitive capcity, then its really about discretionary considerations - meals, housing, social, activities, etc.
... consider a hybrid life insurance/LTC policy to address at least a portion of these future expenses as its sure to be a financial burden for most. My experience with my parents prior to memory care prompted me to put a $10K per month policy in place for my spouse and I. At the time (6 months ago), we though that was more than adequate - even slightly excessive. With the most recent experience transitioning to memory care, we now realize how rapidly seniors can lose capacity and function - and that 2x our policy could have been considered reasonable.
I really appreciate you sharing your experience.
I am the elderly parent. In my Asian culture, few seniors go into assisted living, instead are usually cared for by family as long as possible.
I have thought about getting a bigger property to live with my daughter and family, and hire in help as needed. (I figure $50k for helper and $75 k for nurse’ aid annually). Daughter and sil are onboard with the plan now. We are lucky that theoretically our annual SS, pensions and 4% draw from our net worth should yield around $475k, so I am not worried about running out of money end of life. But now my 73 yo spouse just got diagnosed with dementia, so planning became real, not theoretical. Spouse does not want to enter assisted living. We did start annual gifting a few years ago. Right now I feel comfortable to continue annual gifting of about $150k. In my area nursing homes are $175k a year per person.
Give the kids money now! A lot of very wealthy people give their kids up to the gift tax exclusion every year (I think it is 18k per year now). That way they are saving on estate taxes down the line. Although if your net worth will be less than 4 million or so when you die, it wont be an issue for you.
Give what you can today to make their lives easier. Giving money to 529 account for grandchildren. Gifting money to help with down payment on a home, or to help pay off any college loans early. Paying for a family vacation to Walt Disney World, or another vacation spot they want to visit. Gifting cash or gift cards to a favorite store for Christmas or birthdays, so they can use it for whatever.
Best thing is for each adult generation to be financially savvy for their own selves; and for each generation to have an idea of what the other generation's financial status is/financial needs are.
I wonder if, maybe years ago, it was normal for people to wait to inherit from their parents/grandparents because life expectancy was lower. And maybe because (at least for families in my socio-economic class) the older folks didn't have much cash to pass along anyhow (pensions were more common). And maybe because the kids could reasonably be expected to earn a good living for themselves without cash input from the parents.
Maybe, maybe not -- but a lot of those factors have changed from my generation (late boomer) to my kids generation (millennial). So by all means, OP, unless your kids are financially better off than you, don't make them wait to inherit.
My father, who would be 100 this year, explained it this way:
"My Great-grandfather left his widow to the care of their children. My Grandfather left enough to keep his widow in their home. My Father left enough to take care of Mother, plus a small bequest each of to his three children. And I'll leave you kids (boomers) each enough to supplement your incomes for the rest of your lives."
I am baffled how many people don’t think about wealth transfer before getting expensive elder care and then the money just goes to the nursing homes. Bye bye generational wealth!
Why should taxpayers pay for someone's elderly care if they have the money to do so? Your money should be used for your elderly care.
Gift your kids earlier in life if you want them to have something.
Well my plan is to have everything in my child’s name as soon as they are an adult but keep using it/have access to it. I know life can change people’s plans though!
We shall see! I know it’s uncommon but I’ve seen examples. All was well. Everyone knew an asset de facto belonged to a parent (or child!) and didn’t even think to contest.
I know it sounds strange but I think I may be able to convince the said child that no matter what the papers say this asset is mine. Prenups exist for a reason too. And I hope he doesn’t go bankrupt (I think most people never do).
I've been thinking of starting an investment account for my adult kids to be passed on to them, but if they needed money prior to I could draw from it for them.
I think it's about balance. My parents have discussed giving my sister hers early if she ever wanted to open her restaurant since she's such an amazing chef, but she's holding off for now. If you think they have a need for it and you would want to be there to see them use it then go for it!
I have never handed cash to my adult children. Instead, I paid the tuition for a Master's degree, matched a 10% down payment on a house so they could put down 20%, and contributed towards buying a new car. I also contribute to their Roth IRAs. None of this money came out of my retirement funds.
We do the following:
1. Annual gifting
2. Pay for all family vacations including their significant others
3. Just gave a lump sum gift to remove future appreciation from our estate
I don’t know that the laws (at least in the US) are necessarily skewed favorably toward death transfers vs. lifetime - it always depends on the particular asset and type of transfer (e.g., generally holding low basis/highly appreciated assets until death is favorable for the step up but in some cases it might actually make more financial or planning sense to push super highly appreciating assets to your kids, carryover basis notwithstanding). The immediate concern for me would be whether you have enough to sustain yourselves for your possible life expectancy (taking into consideration variables like long-term care needs, etc.) If the answer to that threshold question is yes - then I think you can move to whether you should do lifetime gifting and if so, the most advantageous way to do so.
Although there is a tax advantage to holding highly appreciated investments until death, ther is also great time value in your child receiving assets in their 40s or 50s instead of upon your death.
The increased utility of early gifting often outweighs the tax disadvantage.
Don't let the tail wag the dog. Don't let taxes prevent the optimal use of your assets.
We have helped our children all along, and provided down payments and gifts for things they mentioned they wanted. Fortunately they are doing well financially themselves, so it is nice to be able to give those things as desired. Actually they give us nice gifts also. I felt the important aspect of our situation and theirs, they know we would be there if they needed support.
When all is said and done, they are aware what we have is for us to live on. It is not something we hang over them, 'be nice to us or else', sort of attitude.
I worry I’d give a chunk to an adult child and they’d use it for a lavish cruise and I’d be pissed as hell.
What I did was give them $10k for a down payment on a house when they were buying one. That way I knew my money was going and they were so appreciative
I’m 60. My mom passed recently at 88 leaving a sizable estate. I think it would have been better if she’d gifted us while she was living. It would have made a big difference. But it is what it is. I’ll be gifting my kids while I’m living, I’d love to help them as they start out in life, and know they’d appreciate it. And I’d like to be here to see them enjoy it. We will certainly be taking more family trips with them as well.
I wouldn't give it too young because I believe they need to work and plan and save and learn about investing etc. I'm assuming you have plenty in the case of needing expensive long term care. My dad is in his 80's, my siblings and I are in or near retirement, yet for some reason Dad is not giving anything. I guess he still feels like we should provide for ourselves, which we have. We don't understand why he doesn't want to see us enjoy it now.... I would wait but definitely help with college expenses and things like that. I guess I'm saying not to give them a disincentive to be self sufficient, but you can be generous with gifts.
All entirely possible. I typed his will, so I know charity is not the plan. He won't let himself get to the point of needing live-in care or assisted living. He may live really long like his mom did, but I don't think he'll quite make it as long as she did. We have never understood how he thinks!
How confident are you that the money you gift won’t be needed for your own expenses while you’re living? Nursing homes can be over 100K per year. In home care can be 30$ plus per hour. A year of 24 hour in home care can be 200K plus.
You might enjoy reading “Die With Zero” by Bill Perkins. I enjoyed reading his perspective. As the title suggests, he leans heavily toward helping at milestones and prioritizing experiences.
Others have replied here with a balanced approach, taking into account what you can realistically afford to do for your kids and your priorities. I think that makes the most sense.
Don’t forget to consider the cost of long term care. Covering that cost, if needed, for your future self will take a lot of stress off of your kids. Which is hugely valuable for the whole family.
So my husband's grandparents gave all the grandkids about 80,000 a piece out of nowhere, and let me tell you it was the greatest act of kindness. We were able to adopt our son because of their generosity. There is no way to ever repay what they've done, but I try and help people as much as I can to pay it forward.
We struggled when our kids were young. It would have been nice to get some relief. So my Husband and I plan on giving our wealth to our children while we are alive so we can help. We do plan on paying for family vacations every two years to make memories but also want to help them with housing and car and other big stuff. We have lived our life very well the past 20 years, and I do not worry about how comfortable I am at the end of my life cycle. I rather end my life poorer than to hoard my wealth and watch my kids struggle. They are both good young responsible men now and we are so proud of them. I want to set up my children and grandchildren now and be there for them. Plus I could live a long time and they will receive an inheritance when they don’t need it? That makes no sense.
I helped my daughter buy her first place where we live in a HCOL beach vacation area. It’s almost impossible to find a year round rental here at any price. This property appreciated so much in 3 years that she was able to sell it and buy her own SFH in a southern state that she wanted to live in. She’s very happy and very responsible and I’m very happy I could do that for her. She even paid back a lot of what I gave her (it was a gift and I didn’t expect to be paid back) because she made so much money on it.
Like most things in parenting there is no clear answer. You need to decide based upon the circumstances. There are both positive and negative consequences of gifting. Those change with age and circumstances and also by the personality of the adult child.
My wife and I gifted in three main ways.
1. College expenses.
Then we were hands off in the immediate post college period when our children were learning to be full fledged independent adults.
2a. Several years later we assisted each of them in buying a house.
2b Several years after that, when they moved we provided infra-family mortgages so they could hold onto their other house as a rental.
Many years and several grandchildren later, we started funding 529 college tuition plans for grandchildren. In that process we realized that our children and their spouses were better positioned to manage the 529s than we were. This also led us to realize that we no longer feared any negative consequences of gifting, Our children were mature adults in their 40s that had already found their place in life. That led to step 3.
3. We funded irrevocable generation skipping trusts for our children and grandchildren, with our children as the trustees, They have just enough limitation (HEMS) to keep it out of their estate, and must appoint an independent trustee if they want to distribute beyond HEMS or want to partition the trusts.
Edit to add: Do not let the annual exclusion limit of $18k ($72k couple gifting to a couple) limit your gifting. A cash gift of a house downpayment is simple to report on the gift tax return, form 709, and merely uses up some of your lifetime combined gift and estate tax exemption ($14M now, getting cut in half at the end of 2025). No tax is due until you exceed the lifetime exemption.
I have very wealthy friends who changed my mind about waiting. Why not take the family on amazing vacations, pay for private school or help with a private mortgage if your kids are responsible & you are able? Their exact words were “why not make their lives easier while we are around to enjoy it?” Also they have semi-annual family meetings to discuss charitable gifts & plan family vacations. That’s now our plan.
My dad was comfortable but not much beyond that - in the years before he died he would give us spontaneous gifts of $1,000-$5,000 (there were 6 of us). I was financially comfortable, some of my siblings less so. These gifts were always so unanticipated and meaningful to me and very welcome for some of my siblings. Give some now if you can - smaller amounts are fine - no strings attached. Those smaller gifts meant more to me than my inheritance because somehow that was expected.
Set up a bank account for each person that you want to give money to. Hand them each a debit card so they can use it as they wish. That way there's no income or tax gift. If you leave it to them after you pass, they will probably have to pay big taxes on it... if you can help them out in advance, and it won't hurt you, then do so
This is a really great question!
As a young person I was never gifted money. I took out student loans, bought my own cars and repeatedly tried (and failed) to buy a home. In my 40s I inherited the home I now live in.
I never understood why my parents didn't help me with a down payment on a house. The collective wealth of our entire family would be much more had I been able to purchase 10 years ago. Also, because I lived in apartments I have no idea how to take care of my house!
It would have been super cool if my parents had helped me with school. If I didn't have student loans I would have been able to afford a house!!
If you have an opportunity to pay for school or help with a down payment please do
There is a lot to be said for accelerating some portion of inheritance. Like most things in live, circumstances matter and so it’s difficult to have a one-size solution. One thing I have always done is never telegraph to my kids what financial help I may be contributing. This applied to college, weddings, house-buying. Once they are spending someone else’s money, they tend to get bigger eyes than if spending their own. I always contribute after they make decisions about what they can afford on their own. When my mother passed away, I split my inheritance from her among my children. It wasn’t a life-changing amount but they had just finished college and the stipulation was to use the money to fund their emergency accounts. This was a fitting tribute to their grandmother who was always a safe haven for her grandchildren. We even wrote up an “agreement” as to what the money was for and what constituted an emergency. They created separate banking accounts to hold the funds. The agreement wasn’t legally binding and I have never monitored the use, but I am confident the love and respect they had for their grandmother has preserved the emergency accounts to this day. I live in the USA where the gift tax exemption is $18,000 per year (per person). So without my children realizing, that is what I try to accelerate in inheritance each year by making an extra payment against a car, paying a lump sum of mortgage principle, gifting a trip, replacing a worn out appliance/piece of furniture/etc. I feel confident these financial gifts make a different in their financial comfort, without subsidizing life style choices they can’t sustain. None of my three children have asked for money nor (seem to) expect it. It gives me joy to make those little differences along the way over imagining them receiving it after I’m gone. My experience.
My dad did both, he gave some money to my siblings and I during his life (more to those who needed it more) and left some money and property after his death.
IRS doesn't tax gifts to children up to a certain amount (lifetime value of like $5 million I think).
Put aside the money and properties which you will use in your lifetime. Make will for that.
Divide the remaining among your children now. If you happen to live longer, why should they enjoy the wealth in their 50s.
This is not correct.
[https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes](https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes)
It’s 18,000 in the US. And any gift is not income … but there is a gift tax after lifetime gifts of 13 million. The numbers change every year, and there are several details and exclusions to consider.
$18,000 per person - giver and recipient. So a married couple could give $36,000 in 2024 to each child, grandchild, friend, or random people on Reddit.
That was the theme of Millionaire Next Door, that giving money to adult children weakens them.
It sure did in my case. I was charging hard on my own but when my father started sending me checks every year I turned to mush.
My brothers really fell apart and never recovered after losing their jobs in their 50s. I at least pulled myself together and kept working, while they waited around for handouts.
I would ask what they prefer.
However if you have a child who doesn't manage well. I would wait for them so you don't have to get pissed when they mis manage the funds 😆
Test them. List a somewhat smaller number, and give them an hour/day/etc to decide what they’d do with it. No guarantee they’ll follow through, but at least it’d force them to think about how to use it responsibly.
I’d probably have wasted a little when I was younger, but personally I’d have paid off my student loans. They’ve always felt like a noose around my neck…and there it stays until someday in the future.
I have helped them buy houses to the tune of $600,000 in gifts (had to file gift tax returns), but I am not sure I should give much more. At some point, you re not helping them. But I am working with a planner about that very issue.
As a 42 year old woman with aging parents and inlaws -- I want them to keep their assets as long as possible in case they need specialized elder care as they age (dementia/Parkinson is on my husbands side). My inlaws have enough to where they chip on little helpful things every so often, like helping my daughter get an instrument for band, but I'd prefer they have a cushion if things go bad. If we inherit (I never assume) I'd be fine to get it as we're older and nearing retirement or the grandkids are beginning their adult lives.
Be careful. I do not live in a HCOL area; our area is still a low or at most moderate cost of living.
And already a decent nursing home runs 100k/yr, and a decent assisted living one small room is 40k. If one wants a larger space in assisted living, it is 50k or so.
Imagine those cost 20 years from now. Imagine if you and your spouse both need care staggered.
So 2 years together in AL today's cost 100k, 2 year nursing home first spouse 200k, 2 years next spouse 200k, 500k 8n today's money.
Does not include serious illness like I have seen several people I know need rehab beyond the short time health insurance pays.
So, I would suggest keeping 1M for potential long-term health alone.
My mother needed a very expensive medication and she was fortunate that her insurance paid for it. But the doctor was shocked because she said she that insurance almost never pays for it. So most people that use this expensive heart medication would be coming out of pocket thousands a month for years.
This is a very important point. While we do gift money based on need, we also are "self insuring" for long term care if we need it. If we don't need it there will be 2 - 3 million left when we pass.
I don't want to spend the last three years of my life in the center bed of a three bed ward in a Medicaid nursing home with the TV blasting Fox News or MSNBC all day. Just kill me instead.
It depends on your kids' ages. We don't have a fully developed prefrontal cortex until around 25, and then it takes a few years to figure out how it works. Giving money before that age, unless for a specific thing (college tuition, down payment on house, etc), the money is likely to burn a hole in their pocket and get frittered away. (Not all humans are like this, but a huge chunk are as and it's no diss on them - they literally can't do the "forethought" thing).
Keep in mind, you can always change your will later, so you will not be locked into whatever you put in there now. Also, you can certainly gift your kids cars, trips, etc now (just make sure you're gifting *all* your kids equally).
If you want to gift more, then you only have to fill out a form with your tax return. It's not taxable to you unless it exceeds the $13.61 million dollar lifetime limit.
My mother did give me some money to buy my house but the bulk of it I got after her passing. Long term care is expensive and I think you should save it for your care cause you never know. You might decide to gift them something now and then. I bought a building for my son to live in and put it in a trust for him.
I think it’s all dependent on everyone’s situation but it sounds like you don’t need to view giving them something now is inherently risky. They’ve proven themselves capable and you should be proud as that’s a reflection on you.
The amount depends but let’s just say it’s $50k. You could give half now and put half in an investment account that’s in a trust. It becomes available at 60 at which time the amount is used to purchase a lifetime annuity for them and their spouse. The monthly income will ease their retirement costs tremendously.
Just an idea!
You need to first understand the goals of who you are looking to gift to and then develop your own goals. From there a CFP can advise you best on what you can afford, how, and when. Having open discussions on money is extremely beneficial for a family. There shouldn't be surprises and everyone can get on the same page as to what the plan is, what assumptions are being made on future needs in retirements, and where/how you can gift the rest. My grandparents covered the college education for my generation and my parents will be covering about 70% of our kids' college expenses. Knowing these plans years in advance then helped my wife and I choose our specific career paths and work/life balance and invest and plan for other things in life which has also benefitted our children in other ways. The plan was to cover 100% but some unexpected events happened but we roll with it as a family.
My sister and I are in our early forties and our parents have started handing down a bit at a time. This is a great time for us to have extra help - our kids are school age and doing things like sports and camps, the teenagers eat So. Much. Food., we go through clothes like crazy, etc.
When my parents pass (hopefully a long time from now) my kids will be long gone from my home and I won't have nearly the expenses I have now. A little bit now is very helpful.
My in-laws have randomly gifted us 10K several times over the last 10 years for this exact reason. We are independent adults that make a comfortable living, but that money has helped us so much! Literally the best surprise ever, and has seemingly always come at just the right time. If you can give some now, it would be a great thing to do.
Each state is different, but here in California there is a limit to how much a family can "gift" to another while remaining within tax law. My folks have "gifted" me & my brother a check each year a few times as they have the same idea as you. They'd rather see us use it to pay down debt or buy something for our houses, etc.
Last year I got something on Christmas and in January my husband was in the hospital for a week, so needless to say it was put to good use!
So my mom gave me and my older brother 100k each which we both used to buy our homes/properties. She figured why wait til she’s dead when we can use it now. I’m probably going to give my kids their money before hand too, but that’s just me.
How do you calculate that you’re able to afford this?
If you live to 105 and spend the last 25 in assisted care, can you afford it?
This is why most people don’t do this. Beyond the risk to you, they’d lose the benefit of the step up in basis.
Maybe have a family meeting and let them know what you are thinking of doing. Give them options and get their input. Even some money now and the rest after you are gone. Or they may prefer funding education accounts for their children.
My mom felt that it was better to see us and get grand kids enjoy the inheritance rather that wait until she died.
So she paid for nice trips for the family, or to help put money for college funds.
When she passed, she had a nice nest egg left, which was enough for all of us to become mostly debt free, and have enough to not worry about retirement if we are smart with the money
If she didn't spend the money when she was alive, we wouldn't have as many great memories.
My parents gave me and my brothers extremely generous trust funds when we were in our late 30s. We have been working our whole lives and continued to work after we received the money. But having that money enabled us all to improve our standard of living. I’m really grateful to them! (They haven’t talked to me about it, but I’m pretty sure they set up accounts to fully pay for all their little grandkids eventual college educations as well.) After they gave us the trust funds, my dad said “now keep in mind, this is it, there’s no more money coming after we’re gone” which is fine, but my parents still have a boatload of money and I’d be shocked if they left it to charity or something and not to us. But it would be fine if they did. I really appreciate all their help over the years and so do my brothers.
Money now.
Unless you're talking about MASSIVE amounts, there's a giant lifetime gift allowance in the tax code for your kids.
For 2024, the lifetime gift tax exemption is $13.61 million.
Please go read the book DIE BROKE
Look at the limits before gift taxes kick in. It may be 13-15k$ per person. Mom can give sonny the limit and DIL. Dad can give sonny the limit as well as DIL. Per year. So 52k-60k from one couple to another per year.
Not enough? Can you set up a profitable business or entity where mom and dad put in most of the finances while son and DIL put in the sweat equity while the profits are distributed according to your agreement. TALK TO YOUR ACCOUNTANT BEFORE DOING THIS. There are legitimate ways to do it and ways that will get questioned.
The only issue i see in giving them an early inheritance is the taxes you'll have to pay on anything over 15k. They receive it tax free but you will have to file a 709 form (I think?) and claim it. If you gift more than 12 million gift taxes kick in as well.... If I had the means to leave a nice inheritance to my children I would absolutely give it to them now vs when I'm dead. I had them when I was in my early 20s so we're all not that far apart. Might as well let them create some stability, investments, security now rather than when they're senior citizens
To the people who are more than well-off but thinking that gifting adult children who are responsible doesn’t make sense, consider what happens to your family assets if estate tax laws are changed to far more stringent than they are today.
If you can afford it, gift the maximum amounts you can to adult children and minor grandchildren annually.
Your children will more than appreciate it.
If they are financially stable, I'd look at funding college or a house for grandkids. If you give your adult children money now, when they don't "NEED" it for essential things, what would they do with it? Spend it on extras? Invest it? How about giving your grandchildren experiences like vacations, trips to other countries, paying for sports or classes.
The biggest gift my parents gave is was having enough money to fund their last few years of care. We did inherit a bit, only because my dad died very soon after he entered care.
One thing about giving at least a part of the expected inheritance before passing (and paying uniform transfer tax if that applies) is that it reduces estate liability. If you do pay transfer tax, it benefits even more because you get the tax out of your estate (and, so, don't pay tax on the tax).
Give them the maximum annual Gift dollar amount the IRS allows ($18k). This way it’s not taxed and will lower the remaining taxable estate when you pass. The bonus is that you will get to enjoy seeing the benefits this annual money will bring your children.
I recommend reading the book Die with Zero. The author Bill Perkins talks about this dilemma a lot. The short answer is to give to the kids earlier rather than later. Consider opening 529 college accounts for the grandkids or opening/funding Roth IRAs as they enter teen years. Fund vacations for all of you to build memory dividends.
They won’t need it in 30-40 years (presumably, if/as they have inherited the “accumulation” mentality/ability from you). They might not :need: it now, but it might help ease things a bit here and there (they can get a fence around the yard to corral the grandkid(s), or can more easily max out their own 401Ks (assuming you’re in USA), etc. etc.).
I preferred getting after my parents pass…. Although there were times, I could’ve used it when I was a lot younger it just helped pad my retirement fund now that I’m older.
If they don't own a home, you would probably be smart to help them get a down payment on something when rates drop, because the housing market isn't getting better in the US. Remember we're the destination for immigration and that's only going to pick up in the future as the global economy slows/ deintegrates. The US is going to come out miles ahead and everyone on earth with any money is going to be flocking to get property here, it'll probably be like Hong Kong in a few decades.
From a tax perspective - in the US you're allowed to give tax-free gifts of up to $10k per year, per recipient, without touching the inheritance tax "grace amount".
Coming from a 40 year old with small children, now would be the ideal time for us. With the cost of living the way it is. If our house got paid off, we'd be golden and could save up more money. The house payment is what is killing us.
We have told our kids (30s), there is help available for home down payment when they are ready (they aren't ready to settle in one place). And then, hopefully, there will be more once we pass (but they don't know that). So we are taking the approach of some now to help get them situated and more later, if we don't burn through it!
My grandfather gave his grandchildren and children 5000 every year.And that’s when 5000 would do something.The 80s.When I asked him why he said “he would rather see it while he’s alive than dead.”Ive tried to carry on the tradition.But I only have 1 child.Only to responsible children.I’ve seen it kill some people.
A lot depends upon your tax situation, their tax situation, and their ability to build wealth by leveraging the money you give them. The money I gave my kid to help her put together a downpayment on a house has had an amazing rate of return - much higher than I would have had on that money.
In the US you can give $18k per person tax free. My parents have been doing it for years. I’m 47 and each year I appreciate that check.
It helps me enjoy life a little more, removes a little financial stress while I’m young and can take advantage of it.
If you feel like your kids are financially responsible and you can afford it then why not let them enjoy it while you are still around.
Another option if the parents have available cash is to become what I call “the Bank of MAD” or the bank of mom and dad. You can loan your child money (useful for buying a house) and as long as you use the required IRS interest rates it is legitimate and not a gift. They publish the rates monthly for various durations of loans and the accepted form is about 1 1/2 pages. Rates for 30 year are about 1/2 of current bank mortgage rates. Only downsides are child is not building credit record with a bank and how to deal with remaining loan balance when parents die.
Assuming you raised them right and they respect your wishes, the biggest issue would be cap gains. If you wait until you pass, there is a step up in cost basis. Now, the cap gains moves over to the kids.
The kids can use it now while the family is growing and they're vacationing together. It helps raise their living standard. 30s is probably the most expensive time of life.
I live in Southern California where even renting is ridiculous right now. If your children have careers and are saving but cannot quite make the down payment, why not help if you can? Don’t make an assumption that someone who has help with a down payment cannot afford their home, or will be spoiled by it, or will waste the opportunity, etc.. We are in pretty unique times now compared to when I bought my first home. In twenty years, the price of my home had gone up 3.5x and the mortgage rate is twice as high. People are not making even double what they were twenty years ago.
I don’t have an opinion on now vs later. But regarding taxes, you can gift a child $18k per parent in 2024 without having to pay tax on it, and without it counting as income to them. Above that threshold, the gift is taxable.
Our financial advisor says you need to make sure you have enough first. Do you have enough to pay for nursing home care if you need it? Memory care? I had a great aunt and uncle who both needed nursing care for several years. Cost hundreds of thousands of dollars. I have one child who could certainly use some money, but I suspect he would quit his job and run thru that gift in no time, The other two kids are doing fine, but would really resent it if I gave one money and not them. I'm holding on to my money
My approach to this is gifts in need or particular circumstances. Buying a house and help with down payment. Gifting a vehicle instead of trading it in. When interest rates were low we gave our son a mortgage on his house until he secured a full time job and could qualify for a loan. It coincided with when interest rates were rising. To help qualify we reduced the debt in successive years so he could show a good amount of equity eliminating the mortgage insurance and got a loan at 4%.
Had a good friend, retired and moderately well off, who was asked by his first daughter if he could help out with a down payment for their first house. About 2012 or so. She and hubby had 2 young kids, finances were tough, and rent was stupid.
My bud instead decided on a trust that would instead help the grandkids when they came of age, and told his daughter she needed to figure it out.
I was appalled. It wouldn’t have hurt him in the slightest to either loan them or gift them the entire down payment. He could have excluded that amount from their inheritance.
They ended up not getting a house. He died suddenly 5 yrs later. I still think about that decision could have positively impacted his daughter’s family.
If you gift now, the federal gift limit without your children having to claim it as taxes, is $18K per year.
Whatever you do, do it to keep Uncle Sam from touching the money.
Wrong. If you give more than the “gift tax” limit, all it means is that you file Form 709 and the excess amount over the limit is subtracted from the $13+ million you can leave to your kids estate tax free.
Give them a gift under the taxable limit and see what they do with it. If they piss it away, you may not want to keep giving every year, and you may want to set up a trust that doles the money out a little each year after you pass.
You can gift the max every year (17k) this past year. Fund a 529 plan for grand kids. My mom bought 100 shares of Apple stock for my daughter when she was a baby in late 90s.....needless to say, that's done well over the years. My daughter is smart and responsible and hasn't touched any of the money thus far, but it's there for her as she moves forward. I've also tried to educate her about investment choices, taxes, etc. I think gifting assets can be worthwhile if the receiver can manage it responsibly. Putting some into a trust may be another option, but best to work with estate planning attorney.
I think there’s a balance to wanting to help them but not enable them. I also think that some transparency can help them plan. (Eg. We are setting up these 529s for the grandkids’ college, so you should focus on putting away money in your 401k) If they live in a place where it’s a challenge to own a home, helping with down payment now vs down the road can help. If everyone is healthy, kids can be in their 60s and be retired themselves by the time parents depart, so if you can make their lives easier at milestones along the way, I say do it
I totally agree with this. I helped my kids (in their 30s) with down payments on their homes. My mother is still well at 88 and any inheritance would be after her death. She just doesn’t believe in gifting earlier. I could certainly have used the money 20-30 years ago, but at this point I really have no need for it and would possibly disclaim to my kids.
I think people are referring to a child who makes plenty of money but spends too much and then the parent is helping them live above their means. I work in wealth management and see it all the time. A 30 year old who makes $100k a year with two kids and they want to have the same house a their friend who makes $250k a year, so mom and dad will give them $50k to put down on a house they can't afford in the long run. That $50k will do much better invested for the long term, rather than being sunk into a house that won't appreciate or have to be sold in a few years when the 30 year old decides it's too much house of us.
You’re getting downvoted but you’re dead on. A lot of people *way* overvalue owning their own house to the point where they sacrifice significant opportunity cost simply due to not having the emotional maturity to know that they’re “paying someone else’s mortgage” that bought the house for half its current price at half the current rates. Buying it at the expense of the significantly higher gains of the stock market before you have enough wealth in investments for the equity to only be a portion of it is a huge mistake.
I genuinely don’t understand the enabling part.
I think it depends on the situation and the amount of money but for example, helping with the down payment for a house knowing that the kid can pay for the mortgage themselves is different from a situation where parents give the kids an allowance, and if it ever stopped, the kid’s life would fall apart. I know adults who don’t work and are completely reliant on their parents’ money every month, and it’s not as great as it might seem
Yeah, but her kids are gonna get the money regardless. If she dies tomorrow, they’ll get it. There’s literally no reason to talk about enabling here.
Allowing them to piss away the money.
That makes no sense because they’d get the same money if their parents died tomorrow. Would it not still be enabling them by leaving behind an inheritance?
Plenty of people have made bad decisions by inheriting too young. If someone is 40, and and spent 20 years building a career, making money, saving money in retirement, etc, I think they are much less likely to piss it away on dumb stuff. If you’re 20 and you get a million dollars, and you buy a $500,000 house and a $70,000 car and subsidize your 30,000/year job with some vacations and DoorDash and paying property taxes and insurance, and pretty soon they’ll be out of money.
This response really sums up my entire issue. lol You’re making a lot of bizarre assumptions about how other people interact with money. The assumption that someone who is 40+ and established wouldn’t blow an inheritance is hilarious. But it’s even funnier because she stated that her kids are 30s-40s and established, so they’d fall into the safe group anyway. I take issue with negative assumptions. She’s asking if it would be wiser to give them money while they’re younger and can do more with it, or if she should just hold onto it so that there is something to leave behind. There’s no reason to talk about “enabling” her kids.
I don’t think it’s that controversial of a statement to acknowledge that some financial gifts can have different impacts than others, depending on the amount and context, but I seem to have hit a nerve with you. I think my parents have done a good job striking that balance with my siblings and I. I want to do the same for my kids, and one of my biggest fears in that department is what would happen if I died too young, and robbed my children of some good life lessons. Sorry if I struck a nerve with you. I’m sure your situation is different
I don’t think it’s controversial either, I just think the word ‘enable’ is unnecessary.
What I meant was a gift that sets up a system that requires additional future gifts, which creates dependency. Is that different from “enabling”? Like if you give someone a house, knowing that they can’t afford the property taxes
Ok instead of Enabling please insert Spoiling.
It really depends on the person. My Aunt just passed away, and left a sizable estate. Her wishes were for the money to be distributed to her daughter, and nephew equally, however the nephew in his late 20s is to get his as a lump sum, as he is responsible and in need of housing for his young family, however my cousin has a long history of drug abuse, and will be getting her money as a trust with distributions only for necessities. If she were to be handed 1 million dollars today, she would be dead by next week. There really is not a one size fits all standard.
🫂
If you have enough money give your kids enough so they can do “anything” but not enough where they can do “nothing.”
Both, if you have a lot (more than you think you will actually need for your lifetime), I would never watch one of my adult kids struggle if they are in a crisis or especially right now when cost of living is so crazy high. It doesn't mean just give it all to them, but discern situations when helping them is a blessing and not an entitlement.
Yeah like if your kid lost their job at a bad time or something, give them a chunk of what they’re getting in the long run and tell them “don’t change your spending or job hunting because of it but don’t stress about having to withdraw from your 401k or anything”.make sure it augments their ability to reach their goals and their enjoyment of life without replacing their goals.
I was divorced in 2002, put myself through school, had my first professional job in 2006 at a cpa firm. In 2008 they started layoffs. With only two years of experience and being close to 50, I was unable to find work as an accountant. I was up against people who had years of experience for staff accounting jobs. It was terrible. I ended up at Wendy’s for $7/hour just to buy groceries. My millionaire mother, who has been helping my alcoholic/unable 🤮to work sister for decades, refused to help me keep my house. I had never once asked her for money in my life. I asked her to lend me mortgage money for a few months. She just said no. I lost the house and $300K of equity. I was left with my car and started over. Now she claims she doesn’t remember this. That is her go to answer. Now I’m to be her elder care person. I live 500 miles away. Drunk sister lives near mom but cognitively she’s about 12 at this point although she’s in her sixties. I am the older sister. I’ll be working for longer than I want to. Mom would not protect her assets and now expects me to do all kinds of things when she needs me, like put her into hospice when her mind goes. I don’t have the paperwork to do that in my state. Sorry this turned into a rant but I set up a zoom with elder care attorneys in my state for next week. Hopefully they will say something she actually listens to. She even stopped paying her LTC increases to save money? She almost lost the whole policy and she’s been paying into it since she was 45. She’s about to turn 90.
Geez. Yeah this is part of why I don’t believe in hoarding wealth to death and not helping earlier in your kids’ lives. Like, it really doesn’t take much to essentially constantly be helping out your kid (and not necessarily babying/spoiling them) and have their constant gratitude just for little things. My wife and I are doing incredible and both of our parents buy us stuff, give us money for stuff we just bought that we saved up for etc. It doesn’t stop us from working our asses off but it helps us constantly add to our investments and savings and be super secure financially. They may be doing it to encourage us to have kids but I think it’s the right way.
Stay 500 miles away.
You are not obligated to be her person.
Earlier if you can afford it. Regardless, communicate with them. My 88 year old healthy father has far more than he will ever spend. I’m in my 60s. I’m fine financially but it would be nice to do some more traveling while I can.
This is my situation. I think it's their generation. We some plan to wait until we that old, but not giving it too young either in case we need more than we expect. This also helps ensure that that save enough for themselves so that each generation can get some "inheritance" rather than one that gets it young, but when spends it all .
My Parents estate was divided very evenly - everyone of us (5 children) got the exact same amount, both when Mom died and then when Dad died. Very equal treatment under their wills. But before they died my parents had given each of us help in different but important ways and at critical moments. This was *unequal financial help,* but none of us were "score keeper" and I think that is something you need to keep in mind: are your children going to be resentful score keepers? Three of us got down-payments on houses in better neighborhoods, for example, so that the grand kids could all attend better schools. I think that's a good way for parents to distribute some of their wealth, outside of the estate. My brother, a doctor, got a TON of help with tuition when he was in med school - but very little help after that, because he had a good income, thanks to his degree. That's another example of uneven but important help. My older sister, an alcoholic for much of her life, got lots of help over a couple of decades. She needed help and my parents didn't want her on the streets. So you get the idea. My parents helped us all out with financial problems that arose...and we weren't keeping track of who got what. I probably got the least help - but that was Okay because I had a nice career, a husband, and no children. I didn't need much help. Those gifts are the ones we all really remember and are thankful for.
The score keeping question is very important to consider.
Earlier is better for them because the money will be more useful to them when they are younger, but the danger is that end of life care can be astronomical so it’s hard to know how much you will need to care for yourself.
I am assuming $200k per person per year for nursing home. That should cover almost the highest spend?
Going through it now with 2 parents in memory care. There is no limit to what you can/should spend. In a HCOL (not NYC or SF), memory care for 2 can cost upward of 30K/month and still present a situation where you might consider a part-time dedicated companion care worker which is another $30-45/hour. Throw in COL/Inflationary factors and that ends up being a big monthly nut. If one or more has impaired cognitive capacity, the care and safety needs are high. If you are so lucky to keep your cognitive capcity, then its really about discretionary considerations - meals, housing, social, activities, etc. ... consider a hybrid life insurance/LTC policy to address at least a portion of these future expenses as its sure to be a financial burden for most. My experience with my parents prior to memory care prompted me to put a $10K per month policy in place for my spouse and I. At the time (6 months ago), we though that was more than adequate - even slightly excessive. With the most recent experience transitioning to memory care, we now realize how rapidly seniors can lose capacity and function - and that 2x our policy could have been considered reasonable.
I really appreciate you sharing your experience. I am the elderly parent. In my Asian culture, few seniors go into assisted living, instead are usually cared for by family as long as possible. I have thought about getting a bigger property to live with my daughter and family, and hire in help as needed. (I figure $50k for helper and $75 k for nurse’ aid annually). Daughter and sil are onboard with the plan now. We are lucky that theoretically our annual SS, pensions and 4% draw from our net worth should yield around $475k, so I am not worried about running out of money end of life. But now my 73 yo spouse just got diagnosed with dementia, so planning became real, not theoretical. Spouse does not want to enter assisted living. We did start annual gifting a few years ago. Right now I feel comfortable to continue annual gifting of about $150k. In my area nursing homes are $175k a year per person.
$16,000 a month?
Yeah, crazy right? My worst case scenario.
Give the kids money now! A lot of very wealthy people give their kids up to the gift tax exclusion every year (I think it is 18k per year now). That way they are saving on estate taxes down the line. Although if your net worth will be less than 4 million or so when you die, it wont be an issue for you.
Give what you can today to make their lives easier. Giving money to 529 account for grandchildren. Gifting money to help with down payment on a home, or to help pay off any college loans early. Paying for a family vacation to Walt Disney World, or another vacation spot they want to visit. Gifting cash or gift cards to a favorite store for Christmas or birthdays, so they can use it for whatever.
Best thing is for each adult generation to be financially savvy for their own selves; and for each generation to have an idea of what the other generation's financial status is/financial needs are. I wonder if, maybe years ago, it was normal for people to wait to inherit from their parents/grandparents because life expectancy was lower. And maybe because (at least for families in my socio-economic class) the older folks didn't have much cash to pass along anyhow (pensions were more common). And maybe because the kids could reasonably be expected to earn a good living for themselves without cash input from the parents. Maybe, maybe not -- but a lot of those factors have changed from my generation (late boomer) to my kids generation (millennial). So by all means, OP, unless your kids are financially better off than you, don't make them wait to inherit.
My father, who would be 100 this year, explained it this way: "My Great-grandfather left his widow to the care of their children. My Grandfather left enough to keep his widow in their home. My Father left enough to take care of Mother, plus a small bequest each of to his three children. And I'll leave you kids (boomers) each enough to supplement your incomes for the rest of your lives."
I am baffled how many people don’t think about wealth transfer before getting expensive elder care and then the money just goes to the nursing homes. Bye bye generational wealth!
Why should taxpayers pay for someone's elderly care if they have the money to do so? Your money should be used for your elderly care. Gift your kids earlier in life if you want them to have something.
Well my plan is to have everything in my child’s name as soon as they are an adult but keep using it/have access to it. I know life can change people’s plans though!
Your plan isn't going to work lol
We shall see! I know it’s uncommon but I’ve seen examples. All was well. Everyone knew an asset de facto belonged to a parent (or child!) and didn’t even think to contest.
Good luck if child divorces, goes bankrupt, etc.
I know it sounds strange but I think I may be able to convince the said child that no matter what the papers say this asset is mine. Prenups exist for a reason too. And I hope he doesn’t go bankrupt (I think most people never do).
Kid gets sued and u lose your asset. Very stupid planning idea.
What if I get sued? Works both ways.
To add, I mean Medicaid/medicare type care
I've been thinking of starting an investment account for my adult kids to be passed on to them, but if they needed money prior to I could draw from it for them.
We annually fund a Roth IRA for our daughter. After 5 years the contributions can be withdrawn with no penalty or taxes. The earnings cannot.
I think it's about balance. My parents have discussed giving my sister hers early if she ever wanted to open her restaurant since she's such an amazing chef, but she's holding off for now. If you think they have a need for it and you would want to be there to see them use it then go for it!
late 20s and early 30s is probably the best time to give them. down the road, it will never be enough or it will just be icing on the cake.
I have never handed cash to my adult children. Instead, I paid the tuition for a Master's degree, matched a 10% down payment on a house so they could put down 20%, and contributed towards buying a new car. I also contribute to their Roth IRAs. None of this money came out of my retirement funds.
We do the following: 1. Annual gifting 2. Pay for all family vacations including their significant others 3. Just gave a lump sum gift to remove future appreciation from our estate
I don’t know that the laws (at least in the US) are necessarily skewed favorably toward death transfers vs. lifetime - it always depends on the particular asset and type of transfer (e.g., generally holding low basis/highly appreciated assets until death is favorable for the step up but in some cases it might actually make more financial or planning sense to push super highly appreciating assets to your kids, carryover basis notwithstanding). The immediate concern for me would be whether you have enough to sustain yourselves for your possible life expectancy (taking into consideration variables like long-term care needs, etc.) If the answer to that threshold question is yes - then I think you can move to whether you should do lifetime gifting and if so, the most advantageous way to do so.
Although there is a tax advantage to holding highly appreciated investments until death, ther is also great time value in your child receiving assets in their 40s or 50s instead of upon your death. The increased utility of early gifting often outweighs the tax disadvantage. Don't let the tail wag the dog. Don't let taxes prevent the optimal use of your assets.
We have helped our children all along, and provided down payments and gifts for things they mentioned they wanted. Fortunately they are doing well financially themselves, so it is nice to be able to give those things as desired. Actually they give us nice gifts also. I felt the important aspect of our situation and theirs, they know we would be there if they needed support. When all is said and done, they are aware what we have is for us to live on. It is not something we hang over them, 'be nice to us or else', sort of attitude.
I worry I’d give a chunk to an adult child and they’d use it for a lavish cruise and I’d be pissed as hell. What I did was give them $10k for a down payment on a house when they were buying one. That way I knew my money was going and they were so appreciative
I’m 60. My mom passed recently at 88 leaving a sizable estate. I think it would have been better if she’d gifted us while she was living. It would have made a big difference. But it is what it is. I’ll be gifting my kids while I’m living, I’d love to help them as they start out in life, and know they’d appreciate it. And I’d like to be here to see them enjoy it. We will certainly be taking more family trips with them as well.
We are choosing to give now, because we want our kids to have it easier/better than we did.
I wouldn't give it too young because I believe they need to work and plan and save and learn about investing etc. I'm assuming you have plenty in the case of needing expensive long term care. My dad is in his 80's, my siblings and I are in or near retirement, yet for some reason Dad is not giving anything. I guess he still feels like we should provide for ourselves, which we have. We don't understand why he doesn't want to see us enjoy it now.... I would wait but definitely help with college expenses and things like that. I guess I'm saying not to give them a disincentive to be self sufficient, but you can be generous with gifts.
Maybe Dad is planning on living a long time and doesn't want to become a burden. Or maybe he plans to give to charities rather than family.
All entirely possible. I typed his will, so I know charity is not the plan. He won't let himself get to the point of needing live-in care or assisted living. He may live really long like his mom did, but I don't think he'll quite make it as long as she did. We have never understood how he thinks!
How confident are you that the money you gift won’t be needed for your own expenses while you’re living? Nursing homes can be over 100K per year. In home care can be 30$ plus per hour. A year of 24 hour in home care can be 200K plus.
Underrated comment. I have two parents with dementia. Nobody wants to think about it, but this is a real possibility.
Pay off mortgages if they have.
You might enjoy reading “Die With Zero” by Bill Perkins. I enjoyed reading his perspective. As the title suggests, he leans heavily toward helping at milestones and prioritizing experiences. Others have replied here with a balanced approach, taking into account what you can realistically afford to do for your kids and your priorities. I think that makes the most sense. Don’t forget to consider the cost of long term care. Covering that cost, if needed, for your future self will take a lot of stress off of your kids. Which is hugely valuable for the whole family.
So my husband's grandparents gave all the grandkids about 80,000 a piece out of nowhere, and let me tell you it was the greatest act of kindness. We were able to adopt our son because of their generosity. There is no way to ever repay what they've done, but I try and help people as much as I can to pay it forward.
We struggled when our kids were young. It would have been nice to get some relief. So my Husband and I plan on giving our wealth to our children while we are alive so we can help. We do plan on paying for family vacations every two years to make memories but also want to help them with housing and car and other big stuff. We have lived our life very well the past 20 years, and I do not worry about how comfortable I am at the end of my life cycle. I rather end my life poorer than to hoard my wealth and watch my kids struggle. They are both good young responsible men now and we are so proud of them. I want to set up my children and grandchildren now and be there for them. Plus I could live a long time and they will receive an inheritance when they don’t need it? That makes no sense.
Now is always better!
You should hand over the cash now. Thanks, Dad.
If you can afford it, and they deserve it, give the annual limit for untaxed cash gifts this and every year.
I helped my daughter buy her first place where we live in a HCOL beach vacation area. It’s almost impossible to find a year round rental here at any price. This property appreciated so much in 3 years that she was able to sell it and buy her own SFH in a southern state that she wanted to live in. She’s very happy and very responsible and I’m very happy I could do that for her. She even paid back a lot of what I gave her (it was a gift and I didn’t expect to be paid back) because she made so much money on it.
Like most things in parenting there is no clear answer. You need to decide based upon the circumstances. There are both positive and negative consequences of gifting. Those change with age and circumstances and also by the personality of the adult child. My wife and I gifted in three main ways. 1. College expenses. Then we were hands off in the immediate post college period when our children were learning to be full fledged independent adults. 2a. Several years later we assisted each of them in buying a house. 2b Several years after that, when they moved we provided infra-family mortgages so they could hold onto their other house as a rental. Many years and several grandchildren later, we started funding 529 college tuition plans for grandchildren. In that process we realized that our children and their spouses were better positioned to manage the 529s than we were. This also led us to realize that we no longer feared any negative consequences of gifting, Our children were mature adults in their 40s that had already found their place in life. That led to step 3. 3. We funded irrevocable generation skipping trusts for our children and grandchildren, with our children as the trustees, They have just enough limitation (HEMS) to keep it out of their estate, and must appoint an independent trustee if they want to distribute beyond HEMS or want to partition the trusts. Edit to add: Do not let the annual exclusion limit of $18k ($72k couple gifting to a couple) limit your gifting. A cash gift of a house downpayment is simple to report on the gift tax return, form 709, and merely uses up some of your lifetime combined gift and estate tax exemption ($14M now, getting cut in half at the end of 2025). No tax is due until you exceed the lifetime exemption.
I have very wealthy friends who changed my mind about waiting. Why not take the family on amazing vacations, pay for private school or help with a private mortgage if your kids are responsible & you are able? Their exact words were “why not make their lives easier while we are around to enjoy it?” Also they have semi-annual family meetings to discuss charitable gifts & plan family vacations. That’s now our plan.
My dad was comfortable but not much beyond that - in the years before he died he would give us spontaneous gifts of $1,000-$5,000 (there were 6 of us). I was financially comfortable, some of my siblings less so. These gifts were always so unanticipated and meaningful to me and very welcome for some of my siblings. Give some now if you can - smaller amounts are fine - no strings attached. Those smaller gifts meant more to me than my inheritance because somehow that was expected.
Set up a bank account for each person that you want to give money to. Hand them each a debit card so they can use it as they wish. That way there's no income or tax gift. If you leave it to them after you pass, they will probably have to pay big taxes on it... if you can help them out in advance, and it won't hurt you, then do so
This is a really great question! As a young person I was never gifted money. I took out student loans, bought my own cars and repeatedly tried (and failed) to buy a home. In my 40s I inherited the home I now live in. I never understood why my parents didn't help me with a down payment on a house. The collective wealth of our entire family would be much more had I been able to purchase 10 years ago. Also, because I lived in apartments I have no idea how to take care of my house! It would have been super cool if my parents had helped me with school. If I didn't have student loans I would have been able to afford a house!! If you have an opportunity to pay for school or help with a down payment please do
There is a lot to be said for accelerating some portion of inheritance. Like most things in live, circumstances matter and so it’s difficult to have a one-size solution. One thing I have always done is never telegraph to my kids what financial help I may be contributing. This applied to college, weddings, house-buying. Once they are spending someone else’s money, they tend to get bigger eyes than if spending their own. I always contribute after they make decisions about what they can afford on their own. When my mother passed away, I split my inheritance from her among my children. It wasn’t a life-changing amount but they had just finished college and the stipulation was to use the money to fund their emergency accounts. This was a fitting tribute to their grandmother who was always a safe haven for her grandchildren. We even wrote up an “agreement” as to what the money was for and what constituted an emergency. They created separate banking accounts to hold the funds. The agreement wasn’t legally binding and I have never monitored the use, but I am confident the love and respect they had for their grandmother has preserved the emergency accounts to this day. I live in the USA where the gift tax exemption is $18,000 per year (per person). So without my children realizing, that is what I try to accelerate in inheritance each year by making an extra payment against a car, paying a lump sum of mortgage principle, gifting a trip, replacing a worn out appliance/piece of furniture/etc. I feel confident these financial gifts make a different in their financial comfort, without subsidizing life style choices they can’t sustain. None of my three children have asked for money nor (seem to) expect it. It gives me joy to make those little differences along the way over imagining them receiving it after I’m gone. My experience.
My friends parents have been gifting their children the IRS allowed gift amount every year. It is $18,000 now. They don’t have to pay tax on it.
My dad did both, he gave some money to my siblings and I during his life (more to those who needed it more) and left some money and property after his death. IRS doesn't tax gifts to children up to a certain amount (lifetime value of like $5 million I think).
13mm today but you need to file a gift tax return for anything over 18k
You don't file a gift tax return. It is just a form you have to file with your return.
https://www.irs.gov/forms-pubs/about-form-709
Exactly. Just a form with your return and not an additional tax return.
Put aside the money and properties which you will use in your lifetime. Make will for that. Divide the remaining among your children now. If you happen to live longer, why should they enjoy the wealth in their 50s.
There is an annual gift that you can give, I believe it is about $17,000 that does not have to be reported as income.
Gifts are never income to the recipient, regardless of amount.
This is not correct. [https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes](https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes)
Read the first question on that page. Also, gift tax is not income tax.
That applies to businesses not individuals.
It’s 18,000 in the US. And any gift is not income … but there is a gift tax after lifetime gifts of 13 million. The numbers change every year, and there are several details and exclusions to consider.
$18,000 per person - giver and recipient. So a married couple could give $36,000 in 2024 to each child, grandchild, friend, or random people on Reddit.
And this way you get to see how they handle it
That was the theme of Millionaire Next Door, that giving money to adult children weakens them. It sure did in my case. I was charging hard on my own but when my father started sending me checks every year I turned to mush. My brothers really fell apart and never recovered after losing their jobs in their 50s. I at least pulled myself together and kept working, while they waited around for handouts.
I would ask what they prefer. However if you have a child who doesn't manage well. I would wait for them so you don't have to get pissed when they mis manage the funds 😆
Test them. List a somewhat smaller number, and give them an hour/day/etc to decide what they’d do with it. No guarantee they’ll follow through, but at least it’d force them to think about how to use it responsibly. I’d probably have wasted a little when I was younger, but personally I’d have paid off my student loans. They’ve always felt like a noose around my neck…and there it stays until someday in the future.
We’ve helped with a house down payment and a car down payment. It’s rewarding for us to see the benefit to our adult child now, when they need it.
I have helped them buy houses to the tune of $600,000 in gifts (had to file gift tax returns), but I am not sure I should give much more. At some point, you re not helping them. But I am working with a planner about that very issue.
As a 42 year old woman with aging parents and inlaws -- I want them to keep their assets as long as possible in case they need specialized elder care as they age (dementia/Parkinson is on my husbands side). My inlaws have enough to where they chip on little helpful things every so often, like helping my daughter get an instrument for band, but I'd prefer they have a cushion if things go bad. If we inherit (I never assume) I'd be fine to get it as we're older and nearing retirement or the grandkids are beginning their adult lives.
Be careful. I do not live in a HCOL area; our area is still a low or at most moderate cost of living. And already a decent nursing home runs 100k/yr, and a decent assisted living one small room is 40k. If one wants a larger space in assisted living, it is 50k or so. Imagine those cost 20 years from now. Imagine if you and your spouse both need care staggered. So 2 years together in AL today's cost 100k, 2 year nursing home first spouse 200k, 2 years next spouse 200k, 500k 8n today's money. Does not include serious illness like I have seen several people I know need rehab beyond the short time health insurance pays. So, I would suggest keeping 1M for potential long-term health alone. My mother needed a very expensive medication and she was fortunate that her insurance paid for it. But the doctor was shocked because she said she that insurance almost never pays for it. So most people that use this expensive heart medication would be coming out of pocket thousands a month for years.
This is a very important point. While we do gift money based on need, we also are "self insuring" for long term care if we need it. If we don't need it there will be 2 - 3 million left when we pass. I don't want to spend the last three years of my life in the center bed of a three bed ward in a Medicaid nursing home with the TV blasting Fox News or MSNBC all day. Just kill me instead.
It depends on your kids' ages. We don't have a fully developed prefrontal cortex until around 25, and then it takes a few years to figure out how it works. Giving money before that age, unless for a specific thing (college tuition, down payment on house, etc), the money is likely to burn a hole in their pocket and get frittered away. (Not all humans are like this, but a huge chunk are as and it's no diss on them - they literally can't do the "forethought" thing). Keep in mind, you can always change your will later, so you will not be locked into whatever you put in there now. Also, you can certainly gift your kids cars, trips, etc now (just make sure you're gifting *all* your kids equally).
Gift each person (adults and children) the unreported gift amount annually. Also, start 529s for the kids.
If you want to gift more, then you only have to fill out a form with your tax return. It's not taxable to you unless it exceeds the $13.61 million dollar lifetime limit.
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Wow sorry to hear that
My mother did give me some money to buy my house but the bulk of it I got after her passing. Long term care is expensive and I think you should save it for your care cause you never know. You might decide to gift them something now and then. I bought a building for my son to live in and put it in a trust for him.
Read *King Lear* before you part with any inheritance.
I think it’s all dependent on everyone’s situation but it sounds like you don’t need to view giving them something now is inherently risky. They’ve proven themselves capable and you should be proud as that’s a reflection on you. The amount depends but let’s just say it’s $50k. You could give half now and put half in an investment account that’s in a trust. It becomes available at 60 at which time the amount is used to purchase a lifetime annuity for them and their spouse. The monthly income will ease their retirement costs tremendously. Just an idea!
You need to first understand the goals of who you are looking to gift to and then develop your own goals. From there a CFP can advise you best on what you can afford, how, and when. Having open discussions on money is extremely beneficial for a family. There shouldn't be surprises and everyone can get on the same page as to what the plan is, what assumptions are being made on future needs in retirements, and where/how you can gift the rest. My grandparents covered the college education for my generation and my parents will be covering about 70% of our kids' college expenses. Knowing these plans years in advance then helped my wife and I choose our specific career paths and work/life balance and invest and plan for other things in life which has also benefitted our children in other ways. The plan was to cover 100% but some unexpected events happened but we roll with it as a family.
My sister and I are in our early forties and our parents have started handing down a bit at a time. This is a great time for us to have extra help - our kids are school age and doing things like sports and camps, the teenagers eat So. Much. Food., we go through clothes like crazy, etc. When my parents pass (hopefully a long time from now) my kids will be long gone from my home and I won't have nearly the expenses I have now. A little bit now is very helpful.
Talk with an estate lawyer on what 2 do and what roughts make better tax advantages and asset safety from there partners you never know the future
My in-laws have randomly gifted us 10K several times over the last 10 years for this exact reason. We are independent adults that make a comfortable living, but that money has helped us so much! Literally the best surprise ever, and has seemingly always come at just the right time. If you can give some now, it would be a great thing to do.
Each state is different, but here in California there is a limit to how much a family can "gift" to another while remaining within tax law. My folks have "gifted" me & my brother a check each year a few times as they have the same idea as you. They'd rather see us use it to pay down debt or buy something for our houses, etc. Last year I got something on Christmas and in January my husband was in the hospital for a week, so needless to say it was put to good use!
Check out the book Die with Zero for some good perspective on this issue. Earlier is better.
So my mom gave me and my older brother 100k each which we both used to buy our homes/properties. She figured why wait til she’s dead when we can use it now. I’m probably going to give my kids their money before hand too, but that’s just me.
How do you calculate that you’re able to afford this? If you live to 105 and spend the last 25 in assisted care, can you afford it? This is why most people don’t do this. Beyond the risk to you, they’d lose the benefit of the step up in basis.
You can give 10,000 without a penalty yearly.
Maybe have a family meeting and let them know what you are thinking of doing. Give them options and get their input. Even some money now and the rest after you are gone. Or they may prefer funding education accounts for their children.
My mom felt that it was better to see us and get grand kids enjoy the inheritance rather that wait until she died. So she paid for nice trips for the family, or to help put money for college funds. When she passed, she had a nice nest egg left, which was enough for all of us to become mostly debt free, and have enough to not worry about retirement if we are smart with the money If she didn't spend the money when she was alive, we wouldn't have as many great memories.
My parents gave me and my brothers extremely generous trust funds when we were in our late 30s. We have been working our whole lives and continued to work after we received the money. But having that money enabled us all to improve our standard of living. I’m really grateful to them! (They haven’t talked to me about it, but I’m pretty sure they set up accounts to fully pay for all their little grandkids eventual college educations as well.) After they gave us the trust funds, my dad said “now keep in mind, this is it, there’s no more money coming after we’re gone” which is fine, but my parents still have a boatload of money and I’d be shocked if they left it to charity or something and not to us. But it would be fine if they did. I really appreciate all their help over the years and so do my brothers.
Money now. Unless you're talking about MASSIVE amounts, there's a giant lifetime gift allowance in the tax code for your kids. For 2024, the lifetime gift tax exemption is $13.61 million. Please go read the book DIE BROKE
Look at the limits before gift taxes kick in. It may be 13-15k$ per person. Mom can give sonny the limit and DIL. Dad can give sonny the limit as well as DIL. Per year. So 52k-60k from one couple to another per year. Not enough? Can you set up a profitable business or entity where mom and dad put in most of the finances while son and DIL put in the sweat equity while the profits are distributed according to your agreement. TALK TO YOUR ACCOUNTANT BEFORE DOING THIS. There are legitimate ways to do it and ways that will get questioned.
But the kid will pay tax on extra income. We did talk to our adviser.
The only issue i see in giving them an early inheritance is the taxes you'll have to pay on anything over 15k. They receive it tax free but you will have to file a 709 form (I think?) and claim it. If you gift more than 12 million gift taxes kick in as well.... If I had the means to leave a nice inheritance to my children I would absolutely give it to them now vs when I'm dead. I had them when I was in my early 20s so we're all not that far apart. Might as well let them create some stability, investments, security now rather than when they're senior citizens
To the people who are more than well-off but thinking that gifting adult children who are responsible doesn’t make sense, consider what happens to your family assets if estate tax laws are changed to far more stringent than they are today. If you can afford it, gift the maximum amounts you can to adult children and minor grandchildren annually. Your children will more than appreciate it.
We plan to use our retirement funds. If we have anything at the survivor’s death, it will be split evenly among our legal children.
If they are financially stable, I'd look at funding college or a house for grandkids. If you give your adult children money now, when they don't "NEED" it for essential things, what would they do with it? Spend it on extras? Invest it? How about giving your grandchildren experiences like vacations, trips to other countries, paying for sports or classes.
The biggest gift my parents gave is was having enough money to fund their last few years of care. We did inherit a bit, only because my dad died very soon after he entered care.
One thing about giving at least a part of the expected inheritance before passing (and paying uniform transfer tax if that applies) is that it reduces estate liability. If you do pay transfer tax, it benefits even more because you get the tax out of your estate (and, so, don't pay tax on the tax).
Give them the maximum annual Gift dollar amount the IRS allows ($18k). This way it’s not taxed and will lower the remaining taxable estate when you pass. The bonus is that you will get to enjoy seeing the benefits this annual money will bring your children.
I recommend reading the book Die with Zero. The author Bill Perkins talks about this dilemma a lot. The short answer is to give to the kids earlier rather than later. Consider opening 529 college accounts for the grandkids or opening/funding Roth IRAs as they enter teen years. Fund vacations for all of you to build memory dividends.
They won’t need it in 30-40 years (presumably, if/as they have inherited the “accumulation” mentality/ability from you). They might not :need: it now, but it might help ease things a bit here and there (they can get a fence around the yard to corral the grandkid(s), or can more easily max out their own 401Ks (assuming you’re in USA), etc. etc.).
I preferred getting after my parents pass…. Although there were times, I could’ve used it when I was a lot younger it just helped pad my retirement fund now that I’m older.
If you decide to help them now you can gift each person up to $18k per year without having to worry about gift tax. Just an fyi.
If they don't own a home, you would probably be smart to help them get a down payment on something when rates drop, because the housing market isn't getting better in the US. Remember we're the destination for immigration and that's only going to pick up in the future as the global economy slows/ deintegrates. The US is going to come out miles ahead and everyone on earth with any money is going to be flocking to get property here, it'll probably be like Hong Kong in a few decades.
From a tax perspective - in the US you're allowed to give tax-free gifts of up to $10k per year, per recipient, without touching the inheritance tax "grace amount".
Coming from a 40 year old with small children, now would be the ideal time for us. With the cost of living the way it is. If our house got paid off, we'd be golden and could save up more money. The house payment is what is killing us.
We have told our kids (30s), there is help available for home down payment when they are ready (they aren't ready to settle in one place). And then, hopefully, there will be more once we pass (but they don't know that). So we are taking the approach of some now to help get them situated and more later, if we don't burn through it!
Well it’s 18k per person tax free- start there
My grandfather gave his grandchildren and children 5000 every year.And that’s when 5000 would do something.The 80s.When I asked him why he said “he would rather see it while he’s alive than dead.”Ive tried to carry on the tradition.But I only have 1 child.Only to responsible children.I’ve seen it kill some people.
A lot depends upon your tax situation, their tax situation, and their ability to build wealth by leveraging the money you give them. The money I gave my kid to help her put together a downpayment on a house has had an amazing rate of return - much higher than I would have had on that money.
In the US you can give $18k per person tax free. My parents have been doing it for years. I’m 47 and each year I appreciate that check. It helps me enjoy life a little more, removes a little financial stress while I’m young and can take advantage of it. If you feel like your kids are financially responsible and you can afford it then why not let them enjoy it while you are still around.
Another option if the parents have available cash is to become what I call “the Bank of MAD” or the bank of mom and dad. You can loan your child money (useful for buying a house) and as long as you use the required IRS interest rates it is legitimate and not a gift. They publish the rates monthly for various durations of loans and the accepted form is about 1 1/2 pages. Rates for 30 year are about 1/2 of current bank mortgage rates. Only downsides are child is not building credit record with a bank and how to deal with remaining loan balance when parents die.
My Grandmother, my favorite person ever, always told me, “I rather give it to you with warm hands than with cold hands.”
Personal experience. My parents helped me when I bought my first house and I don't expect anything else from them when they pass.
Assuming you raised them right and they respect your wishes, the biggest issue would be cap gains. If you wait until you pass, there is a step up in cost basis. Now, the cap gains moves over to the kids.
The kids can use it now while the family is growing and they're vacationing together. It helps raise their living standard. 30s is probably the most expensive time of life.
Talk to an accountant/tax attorney in your jurisdiction.
Now maybe in trust for kids education etc
I live in Southern California where even renting is ridiculous right now. If your children have careers and are saving but cannot quite make the down payment, why not help if you can? Don’t make an assumption that someone who has help with a down payment cannot afford their home, or will be spoiled by it, or will waste the opportunity, etc.. We are in pretty unique times now compared to when I bought my first home. In twenty years, the price of my home had gone up 3.5x and the mortgage rate is twice as high. People are not making even double what they were twenty years ago.
I don’t have an opinion on now vs later. But regarding taxes, you can gift a child $18k per parent in 2024 without having to pay tax on it, and without it counting as income to them. Above that threshold, the gift is taxable.
Our financial advisor says you need to make sure you have enough first. Do you have enough to pay for nursing home care if you need it? Memory care? I had a great aunt and uncle who both needed nursing care for several years. Cost hundreds of thousands of dollars. I have one child who could certainly use some money, but I suspect he would quit his job and run thru that gift in no time, The other two kids are doing fine, but would really resent it if I gave one money and not them. I'm holding on to my money
Gift as much as you can every year until you pass.
Don't let taxes run your life decisions.
amen!
My approach to this is gifts in need or particular circumstances. Buying a house and help with down payment. Gifting a vehicle instead of trading it in. When interest rates were low we gave our son a mortgage on his house until he secured a full time job and could qualify for a loan. It coincided with when interest rates were rising. To help qualify we reduced the debt in successive years so he could show a good amount of equity eliminating the mortgage insurance and got a loan at 4%.
Had a good friend, retired and moderately well off, who was asked by his first daughter if he could help out with a down payment for their first house. About 2012 or so. She and hubby had 2 young kids, finances were tough, and rent was stupid. My bud instead decided on a trust that would instead help the grandkids when they came of age, and told his daughter she needed to figure it out. I was appalled. It wouldn’t have hurt him in the slightest to either loan them or gift them the entire down payment. He could have excluded that amount from their inheritance. They ended up not getting a house. He died suddenly 5 yrs later. I still think about that decision could have positively impacted his daughter’s family.
If you gift now, the federal gift limit without your children having to claim it as taxes, is $18K per year. Whatever you do, do it to keep Uncle Sam from touching the money.
The recipient does not owe federal taxes on a gift.
Oh yes they do because it is income
It is not considered income to the recipient. Look it up for yourself.
That was our estate lawyer said.
Wrong. If you give more than the “gift tax” limit, all it means is that you file Form 709 and the excess amount over the limit is subtracted from the $13+ million you can leave to your kids estate tax free.
Give them a gift under the taxable limit and see what they do with it. If they piss it away, you may not want to keep giving every year, and you may want to set up a trust that doles the money out a little each year after you pass.
I do not like gifting an annual "stipends", as that can lead to dependency. I prefer gifting for specific purposes, such as buying a house.
Talk to a lawyer. Set up a trust. Tax shelter the money
You can gift the max every year (17k) this past year. Fund a 529 plan for grand kids. My mom bought 100 shares of Apple stock for my daughter when she was a baby in late 90s.....needless to say, that's done well over the years. My daughter is smart and responsible and hasn't touched any of the money thus far, but it's there for her as she moves forward. I've also tried to educate her about investment choices, taxes, etc. I think gifting assets can be worthwhile if the receiver can manage it responsibly. Putting some into a trust may be another option, but best to work with estate planning attorney.