Way to set up new account to max out annual gifts

[Anonymous]

For DC's house purchase, we waited until they talked of looking. We then mentioned a gift and roughly the amount. The decisions they made would not have been the decisions I would have made re: timing, location, downpayment. But that's ok.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I struggle with this idea. My kids are teens, so I haven't really put too much thought into this yet, but I worry that I would spoil them in adulthood by gifting them all this money. In one hand I would say if its a gift, then you give them a check and take the risk they blow it or it demotivates them in their career. I think my approach would be a matching system. They have a goal such as save for a house, pay down a debt, or build a nest egg, and I match up to the gift amount each year. That way there is incentive for them to make the best use of it.

Call me when you find a family where this worked well. I can think of one, and they’re all doctors. The parents and the kids. Highly motivated, high achieving, regimented, and inclined to authoritative systems.

Any family where someone actually needs an “incentive” to “make the best use,” it doesn’t work at all and strains relationships.

If you’re using money to try to control your adult children, you’re either forcing them to stay in “child” mode (which we’ve all seen among the adult children of rich people) or they will be seething on the inside or they will have to say “no thank you” and forge their own path. It’s worse for boys.

I’m often in “child mode” with my wealthy parents. It’s corrosive! I manage it okay I think, and I honestly think it helps that I’m a woman and am the caregiver type anyway. Plus clearly, I’m “paid” really well. It’s been harder for my brother. And for some of our cousins, it’s really bad.

Give the money or don’t give the money. Don’t try to use it as a carrot or a stick. It won’t work.

Thats why I say its tied to a goal they have, not one that I have. If they have no goals then there is no discussion about it.

But I also think if I gave all my kids $20k per year each no strings attached and they disrespected me, there would be more relationship strain there, dont you think? So it seems better to just not gift anything at all and just let the money flow when I die?

If the "gift" is predicated on respect, or not being "disrespected" according to whatever you think that encompasses, that's behavioral extortion. Keep your money.

It's a gift in the legal sense. The point i was making is relationship strain is inevitable whether a monetary gift has a purpose (to achieve a financial goal) or whether its just to share wealth. There is no way you are going to not resent someone who doesnt show appreciation for something you give them.

Or are you capable of giving with zero emotions attached? Honest question.

DP: I do not attach emotion to gifts, least of all money to my own kids. Maybe I would have emotion about something sentimental or home made, etc. but then the emotion is in the act of creation and the sadness would just be that the sentiment isn't shared (still no big deal though). I think this really depends on your own relationship to money. I grew up in a community where no one had a lot, but some had more than others. Everyone helped people in need without a thought. My family was helped when we had great need, and every one of us gives back freely as a reflex action. We neither want nor expect anything in return. Once given, it's not mine to spend any time or energy thinking about anymore (and yes, several of us did end up working in philanthropy).

[Anonymous]

To encourage long term savings, we agreed to match our kids' Roth contributions. The savvy kid maxed the Roth contribution, so our match went into his regular account. The other saves less and so gets less and has less. Life lesson.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I struggle with this idea. My kids are teens, so I haven't really put too much thought into this yet, but I worry that I would spoil them in adulthood by gifting them all this money. In one hand I would say if its a gift, then you give them a check and take the risk they blow it or it demotivates them in their career. I think my approach would be a matching system. They have a goal such as save for a house, pay down a debt, or build a nest egg, and I match up to the gift amount each year. That way there is incentive for them to make the best use of it.

Call me when you find a family where this worked well. I can think of one, and they’re all doctors. The parents and the kids. Highly motivated, high achieving, regimented, and inclined to authoritative systems.

Any family where someone actually needs an “incentive” to “make the best use,” it doesn’t work at all and strains relationships.

If you’re using money to try to control your adult children, you’re either forcing them to stay in “child” mode (which we’ve all seen among the adult children of rich people) or they will be seething on the inside or they will have to say “no thank you” and forge their own path. It’s worse for boys.

I’m often in “child mode” with my wealthy parents. It’s corrosive! I manage it okay I think, and I honestly think it helps that I’m a woman and am the caregiver type anyway. Plus clearly, I’m “paid” really well. It’s been harder for my brother. And for some of our cousins, it’s really bad.

Give the money or don’t give the money. Don’t try to use it as a carrot or a stick. It won’t work.

Thats why I say its tied to a goal they have, not one that I have. If they have no goals then there is no discussion about it.

But I also think if I gave all my kids $20k per year each no strings attached and they disrespected me, there would be more relationship strain there, dont you think? So it seems better to just not gift anything at all and just let the money flow when I die?

Yes, I think it’s better for your case to not give them money and just work on your relationship with them as adults. I think it sounds like it’s already kind of dysfunctional. You’re their mom, you shouldn’t be buying respect for $20k a year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Thanks, all. This is OP. This was very useful. We will set it up in kid’s name only and tell of its existence but talk about benefits of not touching it and letting it grow until it’s needed for something bigger. That was useful information about how a joint account could run into tax issues so we won’t do it that way.

I would either give the money for the kid to use as he wants, or hold back until he is more established. The in-between situation can be risky. A relative's young adult child developed a drug addiction after college and it was worsened by her having access to a large amount of money that had been gifted to her and held for later. Once it is in your kid's name you can't get it back.

This. What is the point of setting up an account in their name if you don't want them to use it yet? If you are managing it, they aren't really learning to manage their money, and in fact if they know they have this money to fall back on, they may be more cavalier about managing their own income.

If you want to help them buy a house one day, just save for it yourself and when the time comes, tell them of your gift then.

Google AI came to the consensus that giving regular gifts can create a sense of entitlement and that they should be specific and irregular. I like that answer.

I dunno, it’s because of my parents planned and regular giving that I took a big swing on starting a business. It worked out, and I made way more money than I would have otherwise. But without the gifts, I would still be grinding for a salary. Which is fine. The business could also have failed spectacularly and I would have needed to use their money to keep my family on its feet.

I just don’t think any of this can be controlled by the giver, whether they are alive or dead. Give it or don’t give it, but you’re not in charge of the outcomes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I struggle with this idea. My kids are teens, so I haven't really put too much thought into this yet, but I worry that I would spoil them in adulthood by gifting them all this money. In one hand I would say if its a gift, then you give them a check and take the risk they blow it or it demotivates them in their career. I think my approach would be a matching system. They have a goal such as save for a house, pay down a debt, or build a nest egg, and I match up to the gift amount each year. That way there is incentive for them to make the best use of it.

Call me when you find a family where this worked well. I can think of one, and they’re all doctors. The parents and the kids. Highly motivated, high achieving, regimented, and inclined to authoritative systems.

Any family where someone actually needs an “incentive” to “make the best use,” it doesn’t work at all and strains relationships.

If you’re using money to try to control your adult children, you’re either forcing them to stay in “child” mode (which we’ve all seen among the adult children of rich people) or they will be seething on the inside or they will have to say “no thank you” and forge their own path. It’s worse for boys.

I’m often in “child mode” with my wealthy parents. It’s corrosive! I manage it okay I think, and I honestly think it helps that I’m a woman and am the caregiver type anyway. Plus clearly, I’m “paid” really well. It’s been harder for my brother. And for some of our cousins, it’s really bad.

Give the money or don’t give the money. Don’t try to use it as a carrot or a stick. It won’t work.

Thats why I say its tied to a goal they have, not one that I have. If they have no goals then there is no discussion about it.

But I also think if I gave all my kids $20k per year each no strings attached and they disrespected me, there would be more relationship strain there, dont you think? So it seems better to just not gift anything at all and just let the money flow when I die?

Yes, I think it’s better for your case to not give them money and just work on your relationship with them as adults. I think it sounds like it’s already kind of dysfunctional. You’re their mom, you shouldn’t be buying respect for $20k a year.

I was the one who said I had teens and struggled with the OPs idea. This is only hypothetical at this point for me.

I just cant comprehend giving money out like that and not being emotionally tied to it in any way, especially if my child goes down a path of poor choices that I am regularly funding. Thats why I like the random gift idea.

[Anonymous]

The point of giving in a tax advantaged account is tax advantaged growth

[Anonymous]

Anonymous wrote:For DC's house purchase, we waited until they talked of looking. We then mentioned a gift and roughly the amount. The decisions they made would not have been the decisions I would have made re: timing, location, downpayment. But that's ok.

I gotta say, I don’t get this at all. Why would you want your children to plan, and then totally throw off their plan? Especially if they had some idea it might be coming but couldn’t count on it? That’s the worst of both worlds. If you’re saving for a down payment, you have to be really conservative about investing it. Then you’re swooping in and they’ve missed out on higher returns for years?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I struggle with this idea. My kids are teens, so I haven't really put too much thought into this yet, but I worry that I would spoil them in adulthood by gifting them all this money. In one hand I would say if its a gift, then you give them a check and take the risk they blow it or it demotivates them in their career. I think my approach would be a matching system. They have a goal such as save for a house, pay down a debt, or build a nest egg, and I match up to the gift amount each year. That way there is incentive for them to make the best use of it.

Call me when you find a family where this worked well. I can think of one, and they’re all doctors. The parents and the kids. Highly motivated, high achieving, regimented, and inclined to authoritative systems.

Any family where someone actually needs an “incentive” to “make the best use,” it doesn’t work at all and strains relationships.

If you’re using money to try to control your adult children, you’re either forcing them to stay in “child” mode (which we’ve all seen among the adult children of rich people) or they will be seething on the inside or they will have to say “no thank you” and forge their own path. It’s worse for boys.

I’m often in “child mode” with my wealthy parents. It’s corrosive! I manage it okay I think, and I honestly think it helps that I’m a woman and am the caregiver type anyway. Plus clearly, I’m “paid” really well. It’s been harder for my brother. And for some of our cousins, it’s really bad.

Give the money or don’t give the money. Don’t try to use it as a carrot or a stick. It won’t work.

I am the pp who set one up for my kids. we don't use it as a carrot or a stick. they are all grown up and whenever they are ready to take it over, it's theirs. all three are aware but have not shown interest to take over yet (except maybe DC1). i used to hear the same concerns from everyone here but it wasn't as problematic as people said. i can (and still do when i can) put money in but can't take it out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Thanks, all. This is OP. This was very useful. We will set it up in kid’s name only and tell of its existence but talk about benefits of not touching it and letting it grow until it’s needed for something bigger. That was useful information about how a joint account could run into tax issues so we won’t do it that way.

OP, what’s the size of your estate? There’s a lot of confusion out there about the annual gift tax exemption. Going over it doesn’t mean you owe any taxes. It just means you fill out one form and the overage counts towards your lifetime exemption of $15m for each spouse.

So if your joint assets are likely to stay under $30m, don’t sweat it, you can just give them the whole down payment when the time comes and fill out the one form and not owe any taxes ever anyway. They don’t pay taxes on it no matter the amount.

I have a personal philosophy having watched this play out across my extended family that you should not give gifts to adult children with strings. Because it won’t work anyway and it will damage your relationship and cause problems in their marriage too. Either don’t give them anything, which is valid, or give them gifts without strings and let them f$& up if they’re going to.

The middle ground would be a trust with a generous HEMS clause, but frankly I think you shouldn’t do that unless you need it for taxes.

If your child is so nonfunctional that you need to buy them a house without giving them a gift and letting them decide that’s what they should do (even if you say that’s your suggestion), buy the house and let them stay there as a tenant.

I think there are strings and there are strings— there is a middle ground between saying nothing and having l a trust.

My parents gave me money and suggested I save for a big expense like a downpayment and I did and it worked out great. I’ll probably do the same for my kid. If they want to spend it starting a business that would also be fine. If they want to spend it traveling around the world that’s their choice.

[Anonymous]

Anonymous wrote:I would open a brokerage account and invest it. If you gift it to them, it’s their money to do with as they wish. Please don’t try to put strings on your gift.

This, and work with them to max out their roth ira or ira, and teach them. Do not keep it, hide it and control them with it. It only leads to issues down the road. I don't talk to my mom as her primary source of a relationship is to control with money (except she has tons of money and doesn't give us anything even a $5 birthday gift).