How to equalize financial gifts to adult children

[Anonymous]

Anonymous wrote:I'm not a tax lawyer, but I think the only downside if gifting your single kid more than $19k each year is that each dollar above that reduces the lifetime estimate tax exemption you have to work with. That's currently like $14 million.

The annual gift of $19,000 doesn't go against your lifetime exemption nor do you need to file anything related to it. You and your spouse can each give each of your children $19,000 for a total of $38k to each child. Or, just $19k to each.

[Anonymous]

I have six siblings, and each of us has between 1-4 kids. My parents helped pay college tuition for every grandkid, same amount per kid, and it never occurred to me or any of my sibs to complain that others received more (indirectly) because they had more kids so took more from the potential estate. Similarly, I disagree with all those saying unmarried kids are getting an unequal amount if parents gift to siblings and their spouses/grandkids. These are all separate people and you can’t “roll up” the family and attribute gifts to each of them to just the one child of the grantor. FWIW, my sibs and I are all over the place financially and definitely not similarly situated.

[Anonymous]

We have three adult children all married with children. We have set up irrevocable trusts that will be divided by three. Our annual gifts are always equal for each family. The only thing that is unequal is funding 529's. Each grandchild gets the same soon after birth but not all of our kids have the same number of children. We have done a few "one off" gifts such as paying for IVF but in total we do our best to be equal. Thankfully all of our children are doing well career wise and none of their children has a special need.

[Anonymous]

Anonymous wrote:I'm not a tax lawyer, but I think the only downside if gifting your single kid more than $19k each year is that each dollar above that reduces the lifetime estimate tax exemption you have to work with. That's currently like $14 million.

I can accept that you're not a tax lawyer but you're 100% wrong about the "downside" reducing the lifetime tax exemption. You're correct that it's currently "like $14 million."

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Fwiw I am an adult child and I absolutely don’t care about this kind of thing being equal.

But, we all have enough money and no hardships that would preclude us from supporting ourselves anyway.

The major trust in our family splits per stirpes, so I actually encourage my parents to do unequal distributions when they are alive because some branches have more grandchildren and that just makes sense to me. We definitely get unequal on tuition and housing and no one is upset about that.

You probably should have a conversation about it as a family.

Thanks for this thoughtful response. We have discussed with the married child (who will probably be much better off than the unmarried child) and they don't care about equality but their spouse is reluctant to accept a gift without it being equal. We would also prefer it to be equal.

The married child doesn’t care about equality because they’re getting double as a family. What do you think the other child will feel?

I should have explained further that the married child has said they don't mind if we leave more to their sibling who will not likely to have more money in life. Married child has good income with a spouse with a good income and family money on the spouse's side.

Keep your gifts equal. Life is (hopefully) long and unpredictable. The married child could end up divorced or lose a job, the single child could marry into wealth, illness might strike anyone, etc.

[Anonymous]

If your estate is worth over 14M, like you suggest, you really should talk to a professional to reduce your tax liability.

That said, for a 14M+ estate, 38k is around 0.2% of the estate. It is a rounding error. If the couple has a brood of kids and you keep giving everyone 38k a year, and you should to limit your taxes, maybe in 20-30 years you need to make an adjustment, but for now no one cares.

[Anonymous]

Anonymous wrote:I have six siblings, and each of us has between 1-4 kids. My parents helped pay college tuition for every grandkid, same amount per kid, and it never occurred to me or any of my sibs to complain that others received more (indirectly) because they had more kids so took more from the potential estate. Similarly, I disagree with all those saying unmarried kids are getting an unequal amount if parents gift to siblings and their spouses/grandkids. These are all separate people and you can’t “roll up” the family and attribute gifts to each of them to just the one child of the grantor. FWIW, my sibs and I are all over the place financially and definitely not similarly situated.

Your parents must have a sizeable estate to pay for many grandkids' college tuition. My parents are really concerned about being fair between their direct descendants, so they give equal gifts to each kid to manage for their family/kids as they choose. Grandkids don't directly inherit unless their parent predeceases them, then they inherit per stripes.

[Anonymous]

I don’t understand how all these people who are like “everything should be equal” are all fine with per stirpes. Then it’s only equal for one generation anyway.

I see the new spouse as a daughter or son in law, which makes them an individual at the annual gift table. It is even, if you give each person the same amount. The spouses can keep it separate or not, but imo you’re just saying that in laws get annual gifts, not that the married kid gets double.

I mean the housekeeper can get an annual gift too. It’s not a birthright. It’s a gift.

[Anonymous]

I agree with just give $19k to each child from each of you ($38k total given in two checks). None to spouse, spouse is getting it through his spouse. That’s how my parents do it. It’s fair that way. My husband would never wonder why my parents didn’t write a separate check with his name on it- when they give us the check we think of it as them giving it to “us.” And we would ALWAYS assume the exact same amount is given to sibling.

[Anonymous]

Anonymous wrote:I agree with just give $19k to each child from each of you ($38k total given in two checks). None to spouse, spouse is getting it through his spouse. That’s how my parents do it. It’s fair that way. My husband would never wonder why my parents didn’t write a separate check with his name on it- when they give us the check we think of it as them giving it to “us.” And we would ALWAYS assume the exact same amount is given to sibling.

+1 And aside from fairness issues, so many marriages don’t last. I wouldn’t be giving money directly to daughter’s spouse.

[Anonymous]

The estate tax exemption this year is just shy of $14 million for one person and $28 million for a married couple. At that level of wealth, I'd would gift spouses, as the $19k annual gift is a rounding error and your children will inherit millions. You could call it a birthday present -- it is not overly generous for a family with so many resources.

[Anonymous]

Anonymous wrote:Don’t forget, you can each give $19,000 to each individual. So the max is 38,000 to each individual. You could do 38k to the couple and 38k to the individual. It’s not like you’re required to max out the exemption. But yes, this should all be part of an overall plan anyway.

If you run up on the end of the year, do even gifts and make a point to figure it out for next year. It’s not so terrible not to max it out this year.

I have three kids and I don’t think I would be comfortable gifting more to one than another. I don’t feel like I have to equalize all of the spending it took to raise our kids. Some were college material, one needed a lot of medical care. But gifts are different to me.

I also don’t feel like I want to gift my kids’ spouses. So, I’d be giving $38k to each of my kids, not $38k, $19k and $19k. If my kids with spouses wanted to make that money joint, which is how my spouse and I have handled gifts we’ve received from family throughout the years (though, nothing like that amount of money), they can make that decision.

Your children are lucky that you can do this and that you are being so thoughtful about it.

[Anonymous]

OP, first of all -- don't have the 19K/yr matter -- at all. All you have to do is fill out 1 IRS form if you give more during any one year. It is no big deal.

[Anonymous]

I would tell you that I have two partners and I need $19k for both of them. What are you thinking! Looking for trouble? Your child's spouse is not your child.

[Anonymous]

Your parents must have a sizeable estate to pay for many grandkids' college tuition. My parents are really concerned about being fair between their direct descendants, so they give equal gifts to each kid to manage for their family/kids as they choose. Grandkids don't directly inherit unless their parent predeceases them, then they inherit per stripes.

My parents' estate is not as sizeable as you might think, especially when divided by seven kids - they helped pay for grandkids' college, but they absolutely did not pay all costs. Their contributions were meaningful but not so much that we didn't all save for college as well. Basically, I have a parent that really prioritized the importance of an education and wanted future generations to do the same. But the rest of what you said applies to my family as well - parents wanted to be completely fair between their children, so the ultra high net worth sib inherited the same as the teacher.