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Message
Best Options for Financial Gifts for Family
Posted on 9/1/20 at 12:26 pm
Posted on 9/1/20 at 12:26 pm
My wife and I have recently become aunt/uncle thrice-over (and are actually godparents to all three). We don't have children of our own right now, and so we have some money that we've been stashing away in a savings account which we intend to gift them.
What we'd like to do is give our brothers and sisters the gift, which we'd like to be given to our nephews when they come "of age." So for that reason, we were considering putting the money ($2500 each) in an educational savings account or perhaps a CD. However, because of COVID and economic uncertainty, now we're thinking that we'd like the money to be fairly accessible should they run into any sort of emergency situation.
Anybody have any advice for what route we should take? I appreciate any guidance. TIA
What we'd like to do is give our brothers and sisters the gift, which we'd like to be given to our nephews when they come "of age." So for that reason, we were considering putting the money ($2500 each) in an educational savings account or perhaps a CD. However, because of COVID and economic uncertainty, now we're thinking that we'd like the money to be fairly accessible should they run into any sort of emergency situation.
Anybody have any advice for what route we should take? I appreciate any guidance. TIA
This post was edited on 9/1/20 at 12:28 pm
7
Posted on 9/1/20 at 12:31 pm to UGATiger26
CDs interest rates are incredible low, go with a 529 plan.
Posted on 9/1/20 at 12:35 pm to TigerintheNO
quote:
go with a 529 plan.
Posted on 9/1/20 at 1:01 pm to UGATiger26
What is you level of trust re: brother and sister, not to mention their spouses?
Posted on 9/1/20 at 1:33 pm to SalE
quote:
What is you level of trust re: brother and sister, not to mention their spouses?
Pretty high. We have no concerns that they'd do something stupid and/or selfish.
Posted on 9/1/20 at 1:50 pm to UGATiger26
quote:
We have no concerns that they'd do something stupid and/or selfish.
That’s nice, but you should think harder about this. What if they decide that each kid should be gifted a new car upon high school graduation? Or to fund a gap year traveling the world? Or to buy an engagement ring for the pregnant high school girlfriend? Or to support one kid’s pursuit of an expensive hobby like dressage? Or to pay for musical theater camp, acting or voice lessons, or orthodontia or minor cosmetic surgery? (We all know at least one girl who came back to school in the fall with an “improved” nose.) The definitions of stupid and selfish are not uniform or fixed.
Nor will the parents necessarily treat each child with equal favor—a kid who pursues an interest or activity that overlaps with a parental interest often receives more support, explicit or implicit, than a kid who chooses a path that the parents don’t like. Kids have different interests and capacities....one might turn out to be a brilliant painter, gymnast, etc. and another is content to study early childhood education at the local community college. IOW, parents aren’t necessarily going to spend the same resources on each child.
So figure out: do you truly want to gift the funds to the parents to use as they see fit, suspending your judgement of their choices? If you really prefer it to go to the kids for their own use/choices, hang onto it....address the amounts in your will/estate plan, and decide at what age you want to gift the funds. You can keep saving, quietly, and make a gift to each child in turn when they reach the milestone you’ve picked out....should you not live that long, your estate plans can ensure that the funds pass to the kids rather than the parents.
Posted on 9/1/20 at 2:19 pm to UGATiger26
Keep it simple.
Write a check.
Tell them you love them and to use the money for the good of their children.
You can’t control all human behavior. They may “waste it”, but that does not change the fact that you gave them a gift.
Write a check.
Tell them you love them and to use the money for the good of their children.
You can’t control all human behavior. They may “waste it”, but that does not change the fact that you gave them a gift.
Posted on 9/1/20 at 2:19 pm to hungryone
quote:
So figure out: do you truly want to gift the funds to the parents to use as they see fit, suspending your judgement of their choices? If you really prefer it to go to the kids for their own use/choices, hang onto it....address the amounts in your will/estate plan, and decide at what age you want to gift the funds. You can keep saving, quietly, and make a gift to each child in turn when they reach the milestone you’ve picked out....should you not live that long, your estate plans can ensure that the funds pass to the kids rather than the parents
I appreciate your perspective. Well, that's all really part of the question I'm asking. We want the gift to be "in their name." We don't just want to essentially hand our brothers/sisters cash. The accessibility I mentioned is more of a tertiary concern because of COVID. So that's why I'm trying to learn what the best options are.
I've been looking into 529 plans, which seem to check most of the boxes were looking for. I did not realize that they could be used for K-12, so that's a big plus, since we know that they would like to send their kids to private school.
Posted on 9/1/20 at 2:34 pm to UGATiger26
Here are some options:
Custodial account - it's the child's money to to what they want with it when they come of age (18 or 21 depending on the state). You (or some other adult) are the custodian of the account until then. So, just put the money in an index fund or a mutual fund or something.
529 plan - can be invested but must be used for educational purposes, or you will face a 10% penalty.
Setup a brokerage account and just invest the money yourselves and give it to the kids whenever you want.
If you really intend for there to be flexibility with hoe the money is spent, probably don't want to do a 529 plan. If you really want your brother and sister to potentially be able to use the money themselves, then you probably don't want to do custodial accounts.
Sounds like these are young children, since you indicated the third was just born, so whatever you do, invest the money in something. Don't just let it sit in cash in some .005% savings account at your bank.
Custodial account - it's the child's money to to what they want with it when they come of age (18 or 21 depending on the state). You (or some other adult) are the custodian of the account until then. So, just put the money in an index fund or a mutual fund or something.
529 plan - can be invested but must be used for educational purposes, or you will face a 10% penalty.
Setup a brokerage account and just invest the money yourselves and give it to the kids whenever you want.
If you really intend for there to be flexibility with hoe the money is spent, probably don't want to do a 529 plan. If you really want your brother and sister to potentially be able to use the money themselves, then you probably don't want to do custodial accounts.
Sounds like these are young children, since you indicated the third was just born, so whatever you do, invest the money in something. Don't just let it sit in cash in some .005% savings account at your bank.
Posted on 9/1/20 at 3:06 pm to UGATiger26
I'd put $7500 in a growth stock mutual fund right now then pass it to the three kids (divided by three) when they are 18.
And tell your siblings you are doing this for your nieces/nephews
And tell your siblings you are doing this for your nieces/nephews
This post was edited on 9/1/20 at 3:10 pm
Posted on 9/1/20 at 3:24 pm to UGATiger26
Why not buy whole life ins policies?
They can borrow against them, and most offer guaranteed insurability several times throughout policy period.
They can borrow against them, and most offer guaranteed insurability several times throughout policy period.
Posted on 9/1/20 at 4:15 pm to UGATiger26
529 might be a good option, if you are planning to initially fund with $2,500 per kid and add to it along the way. But again, it will be a parental decision whether to use it to pay for K-12 or let it pile up until college.
Personally, I'd not be transferring assets to the kids or parents...my spouse and I have given generously to our (many) nieces and nephews, but it has been quiet, unexpected, and definitely not equal....mainly because their needs are not equal. These are kids in different households that, over the course of decades, have experienced pretty different standards of living. I'm not gifting the wealthy kids with the same sort of assistance as the (relatively) poor ones. Some have elected to do undergrad and then graduate school, others have gone straight to work...lots of different circumstances, needs, and scenarios unfold as life rolls along. I'd rather invest and then support them as needed at key points along the way. A big symbolic gift when they're young is nice, but I prefer NOT to have my siblings deciding how to spend my money.
Personally, I'd not be transferring assets to the kids or parents...my spouse and I have given generously to our (many) nieces and nephews, but it has been quiet, unexpected, and definitely not equal....mainly because their needs are not equal. These are kids in different households that, over the course of decades, have experienced pretty different standards of living. I'm not gifting the wealthy kids with the same sort of assistance as the (relatively) poor ones. Some have elected to do undergrad and then graduate school, others have gone straight to work...lots of different circumstances, needs, and scenarios unfold as life rolls along. I'd rather invest and then support them as needed at key points along the way. A big symbolic gift when they're young is nice, but I prefer NOT to have my siblings deciding how to spend my money.
Posted on 9/1/20 at 11:55 pm to hungryone
Buy an ounce of gold for them.
Posted on 9/2/20 at 2:10 pm to UGATiger26
Keep the money in your name earmarked for the kids. When they turn 18 and seem to be decent kids, give them the money. In the meantime if your siblings run into financial trouble help them out as you can.
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