Posted on 08/18/2010 9:14:40 AM PDT by Kaslin
Dear Carrie: My husband I and would like to establish college funds for each of our three grandchildren and for any grandkids to come. Our eldest son has two children, our middle daughter has one child, and our youngest isn't married yet. Is it best to split the money equally between the families? Or is it OK to give more to the family with more children? -- A Reader
Dear Reader: This is a great question that raises some interesting issues. When it comes to family dynamics, even the most generous intentions carry the potential for misunderstanding or even resentment. So, you're wise to consider the "how" as well as the "what" before you finalize your plans.
BE CLEAR ABOUT YOUR INTENTION
You mention the possibility of giving money to each family. For me, that brings up a question: Are you giving the money to your kids or to your grandkids? That's important. If you want to give money to your kids, an equal amount to each sibling would probably be the fairest. (You can currently give up to $13,000 a year to any number of individuals without incurring a gift tax. A couple sharing gifts can give up to $26,000.) The problem with this approach is that even though you can explain that the money is intended for your grandchildren's education, you lose control. This approach also has some sticky issues because of the difference in family size and marital status.
Therefore, if your genuine desire is to help pay for your grandchildren's college tuition, it probably makes more sense to set up a specified college account for each grandchild. That way you know the money will be used solely for their education.
DECIDE HOW MUCH TO GIVE
Ideally, it would be good to give an equal amount to each grandchild. If the kids are relatively the same age, that should be fair. Each account would have about the same time to grow. However if, for instance, your son's children are considerably older, you could give a proportionately larger amount to them since they'll need it sooner.
TALK FRANKLY WITH YOUR FAMILY
The most important thing here is to talk openly with all of your children -- both married and unmarried -- about your goal. Let them know that you want to help provide a college education for all of your grandchildren. Discuss the best type of account to open. For instance, a 529 Savings Plan, which is controlled by you and has certain tax advantages when used for qualified education expenses, is one option. (Note that you can front-load a 529 Plan with five years of contributions without incurring gift tax. You can also avoid the gift tax by paying the tuition directly to a school.)
Another choice is a custodial account, which would give you or a specified trustee control of the money and how it's invested until the child reaches the age of majority. Be aware, though, that money in a custodial account becomes the property of the child at 18 or 21, depending on the state, and doesn't have to be used for educational purposes.
Regardless of the account type, specify the amount of money you're providing for each grandchild now -- and be sure to emphasize that you will give a comparable amount to each future grandchild should your family grow.
And last but not least, think about what would be fair and equitable if your youngest doesn't have children. Perhaps you could suggest that, in this instance, you'd contribute an equivalent amount to a business venture or some other type of educational opportunity, or add a clause to your will that would even out the inheritances in another way.
The bottom line is that there's no right or wrong way to go about this. But there are several ways to be fair, depending a lot on you and your family. So many families shy away from talking about money. Your ability and desire to help fund your grandchildren's education is a great opportunity for all of you to share not only the wealth, but also a mutual understanding of what you're giving and why. That can be a valuable learning experience for everyone in and of itself.
My wife and I have figured out a fair and equitable way to distribute our children’s inheritance.
We have decided to spend it.
“as for my money, being of sound mind, i spent every penny”
Best solution
People need to be careful when talking to kids about the money they may or may not get. You can really start some wars between the kids.
My folks had a will but my sister and I never saw it until they passed on. I didn’t want to see it, my sister did. She wanted to see it for fear that I would get more than she did. I really didn’t care because I always felt it was my parents decision.
As far as I’m concerned, the parents need to decide, between themselves, what they want done with their money. Write it down in a will and put it away. My parents had individual wills. They mirrored each other but their feeling was that if one of them died, the other couldn’t change the will of the person that passed on. Which I understand is true. You can still enforce the deceased persons will if need be.
When my father passed on, my mother showed me his will and asked what I wanted to do. I simply told her that it was her money also and I didn’t want it until she passed on. I told her to enjoy it.
My husband and I opened a 529 for our son. When my in-laws give him money they specify that it is for the 529. When my parents give him money, they tell us that we can put it in either the 529 or his savings account. This keeps it simple.
the College fund we set up for my grandson has done nothing but lose money since we set it up 4 years ago. Not sure where to grow money for education.
When the stock market took a dive my dad was worried that he wouldn’t be able to leave my sister and I an inheritance. I told him “you only need to worry about inheritance if your kids are screw ups. You put us through college and taught us well. Spend it all.”
If the kids are of a mind to fight, resent, be jealous, or accuse you of favoritism...they WILL, no matter what you do. Might as well put all the options in a hat and pick one blindfolded.
College is generally a waste of time anyway, in most cases, and a waste of money.
Invest it. Make sure YOU don’t need it.
You might also consider telling all the kids and grandkids that you’re broke. See how the love shakes out. :)
When my grandpa passed away in 1967 he didn’t have a lot of money but he gave it all to my dad. Dad had 5 siblings but none lived anywhere near grandpa except my dad and dad took care of him.
The sum total was around $10,000 after all expenses were paid for grandpa’s funeral, I told you it wasn’t a lot but keep in mind these were 1967 dollars. A testimony to my dad’s generosity is the fact that he divided it up equally among himself and 5 siblings and sent them each a check, my dad was not a wealthy man either, $10,000 was a lot of money to him.
A testimony of one of my uncle’s generosity was the fact that he sent the check back to my dad with a note telling him to keep it because he was the one who took care of grandpa.
We have decided to spend it.”
I agree wholeheartedly with you. I do buy things for the grandchildren that I want them to have and I take the family on a trip once a year. It’s rather turned into a family joke, “Where are we spending our inheritence this year?” I have told my son that the best thing I can do for him is to provide for myself financially so that he doesn’t have to!
One of the most important things a parent must learn, from the time they start asking for an allowance to the time they ask how you plan on paying for their college is dealing with their false sense of entitlement -
“I am, therefore give to me.”
Almost as soon as your child begins to talk, you’ll start to hear him ask for things. In fact, when an infant cries, he’s asking for food or to be made more comfortable. By the time he reaches the age of four or five, his constant refrain becomes: “Can I have this, Mom? Can I have that?” The unending requests for new toys or candy and an “I want it now” attitude may follow you every time you go to the store. Parents want to give to their kids for many reasons. It’s partly instinctual—back in the Stone Age, “giving to your child” might have meant providing food, shelter and protection. Those urges are still there. Unfortunately, if you give in to every little want and need your child expresses, you are really feeding and nurturing a sense of false entitlement—which I believe can lead to problems later on. Like Liberalism.
I’m not saying it’s not a good thing to give to your children. But I do believe that the way you give to them can either help them develop a sense of ownership by earning things, or nurture a sense of false entitlement because they’re usually getting what they want, when they want it.
From your actions kids need to learn:
• Money doesn’t come easily.
• People work hard to earn money; it’s part of life.
• If you want something, you need to work to earn it.
• You are not entitled to things you haven’t earned.
I hope that your post 2 was not in jest, since I think that is the way to go. If you want to give whatever assets you have on hand at your departure from this Earth to something, give them to charities. That’s what the OP and Mrs. OP have in our will. Of course, there are no children but if there were, the will would remain the same as it is.
But I would think 95% of people would disagree with the OP.
We aren’t wealthy but whatever is left will be split among 4 adult children. I’m not concerned about leaving them an inheritance and neither are they. They are all quite independent.
Everything we have is paid for and by choice we don’t spend big bucks, we take a vacation occasionally, eat out whenever we want and keep the air conditioner on whatever temperature we want it and don’t worry about bills.
We are truly blessed by God and so are our children.
If your children are independent and you are not concerned about leaving them an inheritance (your words), why not give it to one or more very deserving charities. Two of the four that we have chosen are the ASPCA and the Salvation Army.
I just don’t get this “leave it to the children”; you gave them life and provided for them until roughly age 18 (more if they went to college and you paid for it). Isn’t that enough?
Unless they took a helluva lot of care of you in your old age, you owe them nothing more.
Sigh, my brother is like this. He keeps trying to get the house that my father built for our family.
I really don’t give a damn bout my mom and the money but my brother means that I have to keep a close eye on him. I really hate doing this.
Well I hope you mean that in a nice way! :)
that came out the wrong way.
I love her, but her money is her money. I really am at a loss what to do about my brother.
It sounds like your dad and your uncle were people of great character.
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