You raised your kids and now they are gone! Empty Nesters at last. After years of worry, expense, teaching and fun you are free of the legal and financial responsibility related to your off spring.
After years of hard work, assume you are now in the peak of your earning years and have managed to amass a sizable estate.
You can, if you want, take those hard earned assets and enjoy the ultimate lifestyle, or you can decide to start a tradition of annual gifting, from one generation to the next.
Why on earth would you volunteer to give your adult children monetary gifts?
You want your children to have a head start in life.
Most of us strive to provide a better life for our children. We spend time training and teaching them. We look for ways to get them in the best schools. Some of us scrimp and save for years to send them through a university. We don’t want them to have to struggle as much as we did.
You want to see how they handle money before you die and leave it all to them.
Gifting should always be done with the idea that you no longer control the money in the gift. The recipient should feel free to do with it as he or she pleases. This gives you a unique window into the future day, that awful day when you die and your heirs inherit your worldly goods. What will they do when they come into all that money?
You want to mitigate the tax bite on your estate.
There are typically tax consequences to what is left of your estate at the time of your death, whether those be capital gains taxes on the difference between the cost of your assets and the market value at death or an actual estate tax on the value of the estate you leave.
Therefore it stands to reason that the lower the value of your estate, the less taxes you will pay.
Give an annual gift (staying within any limits imposed by the tax system under which you live) and your estate is reduced by the amount of the gift. The gift is typically not taxable to the recipient either.
You want to see the smiles on their faces when you give it.
Gifts given freely bring more contentment to the giver than the recipient. Knowing that you are helping the next generation and seeing the smiles on their faces when you give is very satisfyiing.
These are some of the reasons we have established a tradition of passing along part of our wealth while we live, instead of waiting to let them inherit when we die.
Perhaps you are sitting there thinking, Marie, you are just creating entitled, spoiled lazy no account adults when you get in the habit of giving them money.
You want your adult children to be independent, self-sufficient contributing members of society, won’t giving them monetary gifts make them dependent, spoiled, lazy no account adults?
Well, that didn’t happen in our case. We try to take steps to avoid that.
First, we raised our children with the expectation that they would become, and remain, independent of us once they were old enough.
Second, when we started our gifting program, we sat them down with their wives and explained what we intended to do and why we were doing it.
Third, our children were well into their thirties when we started the program. I believe that starting a gifting program before your adult child becomes established in their own endeavors is a huge mistake that could derail them and cause you financial worry later on.
Fourth, we don’t gift the same amount or at the same time each year. What we gives depends on our perception of how much we can give, what other expenses or desires we have ourselves and how we feel about our understanding of our adult child’s handling of finances.
Fifth, each time we give, we stress that it is not a sure thing that they will ever see another gift from us and that we are trying to establish a family tradition of making sure the next generation of family flourishes.
Sixth, we don’t give them enough to live a life of ease. We aren’t that rich! We plan to live long and active lives and will need quite a bit of our estate to see us through to our own ends.
Lastly, we tend to actually refuse to help out when they feel needy. One of our sons lost a job during the 2009 recession. His wife was in the middle of re-training for a new career. They were supporting a young son of hers. Hints were dropped that financial assistance would be nice. We could have stepped in and covered their expenses for a year, but we felt that it was supremely important that our son and his wife overcome their struggle them selves. If they did, they would gain an immeasurable degree of confidence that they could handle anything life throws at them. They did. That is how great people do great things. You do what you have to do. If you aren’t presented with obstacles, you don’t grow.