Ask The Advisor - Should I Give Money To My Adult Children?Submitted by Private Client Advisory, Inc. on April 11th, 2018
I wanted to talk to you today about a very important topic that periodically we receive here at Private Client Advisory at our practice. It's about, "My children need financial help, and there's some serious issues. What should I do?" I'd like to address that today.
First of all, let me tell you who I am, if you don't know me. My name is Roger Sulhoff. I serve clients as a family wealth advisor here with Private Client Advisory, headquartered in Gainesville, Georgia.
Delighted for you to spend this next couple of minutes with me, and if you have interest in this particular topic, I want you to feel free to email us or give us a call. Our phone number is (770) 297-9000, and you can go to extension 208 and set a time for us to be able to visit.
The children issues are really pretty immense for many, many families. I'm not talking about trying to save money for college or try to help them out with a car or something. Kids grow up, and they get in ... I wouldn't say trouble, but they have issues that they just simply can't contend with.
The fundamentals to begin with, I believe, and that is that we love our children equally. However, we need to treat them uniquely.
Certainly, we see those types of thought processes being implemented into the legacy estate plans that we put together for distribution of estates, but most of the time, we don't really look at it while we're alive and when we're faced with it on a day-to-day basis. What happens when my kids are really in need of some money?
One, a point that I think is important, and that is to discern should this be a loan of money or should this not be even any money at all or should I just simply gift them money?
Well, let's talk about that.
One, because we love our children equally, we need to treat them uniquely, I believe that parents, even though they're out of the ... Let's say they're out of the home and they're starting their own life and doing their own thing, and we told them they're basically, you need to fend for yourself out there. For some people have said that.
I think it's important that we do have some type of ability financially to be able to help them when they have needs so that it doesn't put them down the tube into serious trouble or something that may cause them to do something that they really shouldn't do.
Like in the Bible, it talks about give me enough so that I can meet all my needs, but don't give me so much that I become greedy and have no dependence upon God.
At the same time, don't give me so little that I end up going out and stealing. So we don't want our kids to be able to go out and have to do bad things, so sometimes we really do need to provide them the money.
On that basis, I pretty much never see, and when I get into the nitty gritty of a personal interview with a client, the need for a loan. I like to term it a gift. I'd rather see it a gift.
Sometimes the gift needs to be structured. It may be I'm giving you this now in advance of what you would receive in your inheritance. That could be a form of a gift that may be more acceptable, certainly, than a loan.
But a loan has a master/servant relationship with it, whereby your child, then, may be reluctant if they can't meet the payments paying you back, that maybe they don't come for Thanksgiving this year.
Easter is coming up. Maybe they don't want to come to Easter. They've got something else that just happened to come up that they can't make it. What they're really thinking is, "I don't want to see Mom and Dad because I owe them some money. I'm behind on my payments, and I can't sit there at the table and feel good about that."
We don't want to separate the love we have and the family unity we have over any kind of money issue. That's why I'm basically against loans fundamentally.
The gifting part is a little bit more complex, because the gift may be for this child, where this child, perhaps, maybe has more ongoing financial issues than maybe the other children.
So maybe a family of three might have two of them that are just great financially. Everything's fine and dandy. They've got great jobs, great families, blah, blah, blah. All that sort of thing. Working good, but you've got one that's really having struggles and that type of thing.
Should you be gifting that child and at the same time not gifting the others?
Some clients when they talk to me, they say, "If I'm going to give John $5,000, maybe I should go ahead and give Bill and Susan also $5,000 to balance it out right now." Well, that's $15,000 out of your income... $15,000 out of your ability for you to be able to stay intact until they plant you in the ground.
So let's look at it from the standpoint of that being a unique gift for a unique purpose.
Then there will be opportunities that doesn't happen simultaneously with his needs for the others where you can find ways to gift to them. Maybe it's for a private school education. Maybe it's for special needs so they don't have to finance an automobile or something along those lines when something comes up. Don't worry about it. Everything having to happen all together at the same time.
Things seem to balance out over the years in terms of your gifting.
Last but not least, we want to make sure that each child is not put in a position where they have to do things that their core values that you trained them in would not be appropriate.
For that, we do need to look at seriously on an individual basis ... Every case is different ... just exactly what you're going to do for that child that's in their best interest, because we're stewards of these children and custodians of these children, not just when they're growing up, not just when they're in elementary and high school and college, but for the rest of their lives.
That's what we're entrusted with. From that standpoint, we want to be able to keep that family intact, and money is certainly something that will help keep them intact.
I probably have gone long on some different issues here, but it is an issue that affects a lot of families.
What I would suggest you do is you take the information you've got now in this couple of minutes and go ahead and drop us an email at firstname.lastname@example.org or give us a call, (770) 297-9000. Go to extension 208 and ask Scott to set a time for us to get together. Maybe just a phone call will work.
Maybe you need to stop by the office and have a chat or maybe a videoconference.
But anyway, I'd be more than happy to talk with you about this, whether you're a client or not a client.
Certainly, if it's a first-time interview situation as a non-client, that's totally complementary on our part, and we're glad to do it for you just as an outreach to you.
Anyway, I hope you enjoyed this couple of minutes and got some value out of it.
In the meantime, I'll see you next time. God bless.