Should I Dump a Pile of Money on Young Son?

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klneutral
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Should I Dump a Pile of Money on Young Son?

Post by klneutral » Fri Jul 20, 2018 7:55 am

Wife and I are set and might live 30 more years whereupon estate taxes might be a concern.

Mother died and left me $1M. Considering whether to disclaim in favor of son. Would ask him to hang onto it until wife and I are both dead.

Son is nearly 24, left home after high school and has not asked for a dime since. Went to Air Force Academy, supported himself and maxed out his IRA all 4 years with little help from us. Graduated with no debt. Single.

Graduated in 4 years with math major, will finish pilot training in Nov. Is maxing out his IRA and TSP on 2d Lt pay.

Upon son's graduation, wife and I offered to pay half of new car. He declined and said he is fine with the 22 year old car we had given him and that he continues to drive, with no A/C, in TX.

Should I worry about "ruining" him by dumping $1M on him so young?

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simplesimon
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Re: Should I Dump a Pile of Money on Young Son?

Post by simplesimon » Fri Jul 20, 2018 7:57 am

Why do you want to do this?

KlangFool
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Re: Should I Dump a Pile of Money on Young Son?

Post by KlangFool » Fri Jul 20, 2018 7:58 am

klneutral wrote:
Fri Jul 20, 2018 7:55 am

Should I worry about "ruining" him by dumping $1M on him so young?
klneutral,

Yes. He is doing fine living independently.

KlangFool

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TomatoTomahto
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Re: Should I Dump a Pile of Money on Young Son?

Post by TomatoTomahto » Fri Jul 20, 2018 7:59 am

I personally wouldn’t “dump” that amount on him, but BRAVO! for raising such a great kid.

RudyS
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Re: Should I Dump a Pile of Money on Young Son?

Post by RudyS » Fri Jul 20, 2018 8:12 am

I wouldn't "ask him to hang onto it till we are both dead." Either give or not. No way to predict what might happen in the interim.

Rupert
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Re: Should I Dump a Pile of Money on Young Son?

Post by Rupert » Fri Jul 20, 2018 8:25 am

No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.

Thegame14
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Re: Should I Dump a Pile of Money on Young Son?

Post by Thegame14 » Fri Jul 20, 2018 8:32 am

Why don't you set up a trust and put rules into place, like he can only take out the gains for the next so many years, or can only take out a certain dollar amount of principle each year.

carguyny
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Re: Should I Dump a Pile of Money on Young Son?

Post by carguyny » Fri Jul 20, 2018 8:36 am

Congrats on raising a great kid - I hope mine ends up with the same great judgement (he's only 4!).

I'm going through a lot of the same situation now as we're set and looking at a lot of estate taxes as we keep working. I begrudgingly set up a UTMA which is highly likely to be well north of $1m when he's 21.

I would talk to your son and come up with a plan for the money. Agree a handshake deal on what he's going to do with it. He clearly has strength of character and if he makes a mistake, better to do it on this first $1m.

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hand
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Re: Should I Dump a Pile of Money on Young Son?

Post by hand » Fri Jul 20, 2018 8:40 am

Yes you should be worried about ruining him, however impact of gifted wealth is very individual dependent.
From what you've said, it sure seems like he is well positioned to handle this potential gift well (though negative outcomes are always possible).

It sure seems like there are lots of opportunities to use the money to improve his life and give him more flexibility:

1) Safer Car
2) Choosing a career / military service based less on potential income and more on other rewards (skills, thrills, service etc.)
3) Allow him to continue good habits of maxing retirement accounts
4) Allow him to take advantage of opportunities for unique experiences while he is young

Perhaps passing along the money along with an obligation to use for "good" would reduce the risk of ruin?

aristotelian
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Re: Should I Dump a Pile of Money on Young Son?

Post by aristotelian » Fri Jul 20, 2018 8:41 am

Seems like a trustworthy kid. I would be inclined to do it.

I share your concern as I currently manage an inheritance given to my young kids (now 9 and 11) without my knowledge. Of course it is a good problem to have. I don't really have a choice, but ultimately I have come to terms with the possibility that they may fritter the money away. I think the more likely outcome is that if they have good habits and values, they won't.

One other option to consider is putting a portion in a Donor Advised Fund, either in his name or with him as beneficiary.

pilot_error
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Re: Should I Dump a Pile of Money on Young Son?

Post by pilot_error » Fri Jul 20, 2018 8:42 am

I love this post! It sounds like you are talking about me...except there is no way I could handle Laughlin heat without A/C. Here are some thoughts.
-UPT commitment to Uncle Sam is 10 years after graduation. No amount of money is going to turn him into a bum as he has a lot of trips to the Middle East in his future.
- Don't try to cut any corners when you gift it to him. He will have a security clearance that inspects his finances and a 7 figure transfer is going to trigger red flags. I'm not talking IRS audit, I'm talking anti-Snowden, grounded from flying, FBI investigation if not done correctly. He will need to talk to his security manager before hand and "disclose" the gift so as to show it isn't from a foreign agent.
-If I had been given that money shortly after UPT, I would have gone on more exciting vacations and experienced more of the world in my free time. Maybe lived in a nicer part of town.
- One concern, wait to see that he marries an equally frugal spouse, pilots tend to attract and fall for non-bogelheads and your money may end up paying someone else's college debt or shopping habit.
-Also consider that the simply the information about this money may be enough to improve quality of life. I know people who are literally missing their children's entire childhood as they suffer through 20 years of active duty to get that pension. Even if they didn't have your $1M at age 24, the knowledge they could get it at 54 years should a need arise, would allow them to skip active duty, skip the deployments, and spend time with their family. You don't have to give him the money, just tell him that someday you will. (Keep it100% stock for him)

barnaclebob
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Re: Should I Dump a Pile of Money on Young Son?

Post by barnaclebob » Fri Jul 20, 2018 9:11 am

I wish my parents would do something like that for me and it sounds like your son is plenty responsible. I wouldn't put any stipulations on it like wait for us to die. Tell him its intended to help with large life expenses like college for his eventual kids, buying a house etc.

Worst case if he blows it then you know to button up your estate plan.

Always passive
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Re: Should I Dump a Pile of Money on Young Son?

Post by Always passive » Fri Jul 20, 2018 9:19 am

Things can get complicated if/when he marries, should the marriage do not work out.

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Pajamas
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Re: Should I Dump a Pile of Money on Young Son?

Post by Pajamas » Fri Jul 20, 2018 9:25 am

klneutral wrote:
Fri Jul 20, 2018 7:55 am
Would ask him to hang onto it until wife and I are both dead.
I don't see any problem given the information you provided and assuming that you and your wife won't need the money in the future. However, I don't see why you would ask him to hang onto it until you your wife die and I also don't think you should just dump it on him without at least having one good discussion about how to handle it, what to do with it, etc. He sounds mature for his age but he's still 24 years old.

masonstone
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Re: Should I Dump a Pile of Money on Young Son?

Post by masonstone » Fri Jul 20, 2018 9:27 am

You should read the millionaire next door before doing so. You might ruin his life by doing so.

Dottie57
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Re: Should I Dump a Pile of Money on Young Son?

Post by Dottie57 » Fri Jul 20, 2018 9:28 am

Don’t give him the whole amount. How about 20k every 5 or so years to make things easier. Off to give him a downpayment tp a house when he becomes seriously interested. Keep the bulk for yourself in case of medical emergency.

staythecourse
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Re: Should I Dump a Pile of Money on Young Son?

Post by staythecourse » Fri Jul 20, 2018 9:36 am

Is he married? If not then NO I would not do it. If yes then depends on if you are okay with his (maybe) ex wife getting part of it on an potential divorce in the future. Then, of course, then MORE likely spend thrifting from the spouse is a possibility as well even if it is not a divorce situation.

Sounds harsh, but reality is risk mitigation deals with ALL possible factors and giving money to grown child throws in the curve ball of the spouse as well.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

Rupert
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Re: Should I Dump a Pile of Money on Young Son?

Post by Rupert » Fri Jul 20, 2018 9:37 am

Dottie57 wrote:
Fri Jul 20, 2018 9:28 am
Don’t give him the whole amount. How about 20k every 5 or so years to make things easier. Off to give him a downpayment tp a house when he becomes seriously interested. Keep the bulk for yourself in case of medical emergency.
+1. This is what I would do -- gift it to him annually over time, help with nice house downpayment, take him on really nice family trips, fund his future kids' college savings accounts, but still hold on to the bulk of it in case it's needed for your own retirement/longterm care/etc.

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Re: Should I Dump a Pile of Money on Young Son?

Post by letsgobobby » Fri Jul 20, 2018 9:41 am

Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.

bgf
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Re: Should I Dump a Pile of Money on Young Son?

Post by bgf » Fri Jul 20, 2018 9:42 am

gift him half the dividends annually and reinvest the rest. merry christmas son. also maybe make it clear that these are gifts and should be not considered as reliable in the future.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: Should I Dump a Pile of Money on Young Son?

Post by Rupert » Fri Jul 20, 2018 9:50 am

letsgobobby wrote:
Fri Jul 20, 2018 9:41 am
Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.
Because money is more likely to make a young person do stupid things than an old person. I have no evidence to support this other than my personal life experience. I know what I would have done with $1 million dollars at age 24, and I know what I would do with that amount of money now as a not-so-young person. (And no one would have ever characterized me as an irresponsible person, even when I was 24).

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Re: Should I Dump a Pile of Money on Young Son?

Post by annielouise » Fri Jul 20, 2018 9:53 am

I would absolutely feel comfortable giving the son you described this money. He has already shown that he is a responsible adult. I would offer to discuss how he should handle the money, but I would ultimately leave choices up to him.

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Re: Should I Dump a Pile of Money on Young Son?

Post by lostdog » Fri Jul 20, 2018 9:57 am

annielouise wrote:
Fri Jul 20, 2018 9:53 am
I would absolutely feel comfortable giving the son you described this money. He has already shown that he is a responsible adult. I would offer to discuss how he should handle the money, but I would ultimately leave choices up to him.
+1

Or you could gift him yearly the the max limit before it gets taxed. I think it's around 13k or 14k yearly. Kind of a middle ground without the feeling that you'll ruin him.

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Re: Should I Dump a Pile of Money on Young Son?

Post by munemaker » Fri Jul 20, 2018 9:59 am

lostdog wrote:
Fri Jul 20, 2018 9:57 am
annielouise wrote:
Fri Jul 20, 2018 9:53 am
I would absolutely feel comfortable giving the son you described this money. He has already shown that he is a responsible adult. I would offer to discuss how he should handle the money, but I would ultimately leave choices up to him.
+1

Or you could gift him yearly the the max limit before it gets taxed. I think it's around 13k or 14k yearly. Kind of a middle ground without the feeling that you'll ruin him.
Gifts above the annual limit ($15k) do not get taxed unless the cumulative exceeds $5.6 million. You just have to file a form.
Last edited by munemaker on Fri Jul 20, 2018 10:02 am, edited 1 time in total.

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Re: Should I Dump a Pile of Money on Young Son?

Post by cheese_breath » Fri Jul 20, 2018 10:00 am

RudyS wrote:
Fri Jul 20, 2018 8:12 am
I wouldn't "ask him to hang onto it till we are both dead." Either give or not. No way to predict what might happen in the interim.
And once you do give it you lose all control. It's his to do what he wants.

Why not look into setting up a trust?
The surest way to know the future is when it becomes the past.

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Re: Should I Dump a Pile of Money on Young Son?

Post by Glockenspiel » Fri Jul 20, 2018 10:00 am

I wouldn't dump the whole thing on him at one time. Your son sounds very responsible, but gifting that in one lump sum could cause potential problems with the IRS, cause him to become a target (from investment "advisors", etc), cause issues with a future marriage, etc.

I like the idea of gifting him a large down payment for a home, funding his future children's college educations, buying him a new safe vehicle, $1,000 for Christmas, $1,000 for birthday, etc, etc.

lostdog
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Re: Should I Dump a Pile of Money on Young Son?

Post by lostdog » Fri Jul 20, 2018 10:01 am

munemaker wrote:
Fri Jul 20, 2018 9:59 am
lostdog wrote:
Fri Jul 20, 2018 9:57 am
annielouise wrote:
Fri Jul 20, 2018 9:53 am
I would absolutely feel comfortable giving the son you described this money. He has already shown that he is a responsible adult. I would offer to discuss how he should handle the money, but I would ultimately leave choices up to him.
+1

Or you could gift him yearly the the max limit before it gets taxed. I think it's around 13k or 14k yearly. Kind of a middle ground without the feeling that you'll ruin him.
Gifts above the annual limit do not get taxed. You just have to file a form.
Very cool!! Even better.

Dottie57
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Re: Should I Dump a Pile of Money on Young Son?

Post by Dottie57 » Fri Jul 20, 2018 10:01 am

letsgobobby wrote:
Fri Jul 20, 2018 9:41 am
Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.
If you’ve ever seen someone receive a large amount and go nuts, you would know. Money does change people, especially if acquired fast.

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Re: Should I Dump a Pile of Money on Young Son?

Post by Grt2bOutdoors » Fri Jul 20, 2018 10:08 am

At first glance the dollar amount seems large. That said, I’d like to offer the following in your son’s favor: graduated the U.S. Air Force Academy where the entrance rate into it is more selective than that of the public/private institutions, he graduated, he majored in one of the most difficult subjects, he’s now in pilot training. A pilot who will be flying in multi million dollar pieces of valuable machinery and technologies. He’s serving our country.

Yes, you can “dump” it on him. If you haven’t already done so or he hasn’t read any of the recommended reading here, give him a book and a letter on what it is you are giving, why and what your hopes are. I have no doubt he will be a good steward of this good fortune.

P.S. you might want to put it in a trust to protect against vultures that appear from time to time.
Last edited by Grt2bOutdoors on Fri Jul 20, 2018 10:13 am, edited 1 time in total.
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Re: Should I Dump a Pile of Money on Young Son?

Post by Grt2bOutdoors » Fri Jul 20, 2018 10:10 am

Dottie57 wrote:
Fri Jul 20, 2018 10:01 am
letsgobobby wrote:
Fri Jul 20, 2018 9:41 am
Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.
If you’ve ever seen someone receive a large amount and go nuts, you would know. Money does change people, especially if acquired fast.
Would it change your mind that this young man will be flying multi million dollar pieces of technology, now if not in the future?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

randomguy
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Re: Should I Dump a Pile of Money on Young Son?

Post by randomguy » Fri Jul 20, 2018 10:16 am

Always passive wrote:
Fri Jul 20, 2018 9:19 am
Things can get complicated if/when he marries, should the marriage do not work out.
Prenup/trust gets rid of most of those issues.

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Re: Should I Dump a Pile of Money on Young Son?

Post by Grt2bOutdoors » Fri Jul 20, 2018 10:18 am

masonstone wrote:
Fri Jul 20, 2018 9:27 am
You should read the millionaire next door before doing so. You might ruin his life by doing so.
What is the difference if say someone gave you a million as a gift versus an inheritance at age 24? Would you say an inheritance would ruin someone at age 24?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

randomguy
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Re: Should I Dump a Pile of Money on Young Son?

Post by randomguy » Fri Jul 20, 2018 10:22 am

munemaker wrote:
Fri Jul 20, 2018 9:59 am
lostdog wrote:
Fri Jul 20, 2018 9:57 am
annielouise wrote:
Fri Jul 20, 2018 9:53 am
I would absolutely feel comfortable giving the son you described this money. He has already shown that he is a responsible adult. I would offer to discuss how he should handle the money, but I would ultimately leave choices up to him.
+1

Or you could gift him yearly the the max limit before it gets taxed. I think it's around 13k or 14k yearly. Kind of a middle ground without the feeling that you'll ruin him.
Gifts above the annual limit ($15k) do not get taxed unless the cumulative exceeds $5.6 million. You just have to file a form.
Will that not use up part of the estate tax exemption that the OP might be paying? And note both spouses can give money to the kid.

delamer
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Re: Should I Dump a Pile of Money on Young Son?

Post by delamer » Fri Jul 20, 2018 10:25 am

Give the $1 million in the form of a trust, if at all. Protects him in the event of divorce, law suits, a tragic accident in which he needs long-term medical care, etc.

Or set it aside in an account with him as beneficiary and invest it for a 24-year-old with a very long time horizon.

And/or just gift him up to the annual amount exclusion amount — $15,000 per gifter.

Rupert
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Re: Should I Dump a Pile of Money on Young Son?

Post by Rupert » Fri Jul 20, 2018 10:27 am

randomguy wrote:
Fri Jul 20, 2018 10:22 am
munemaker wrote:
Fri Jul 20, 2018 9:59 am
lostdog wrote:
Fri Jul 20, 2018 9:57 am
annielouise wrote:
Fri Jul 20, 2018 9:53 am
I would absolutely feel comfortable giving the son you described this money. He has already shown that he is a responsible adult. I would offer to discuss how he should handle the money, but I would ultimately leave choices up to him.
+1

Or you could gift him yearly the the max limit before it gets taxed. I think it's around 13k or 14k yearly. Kind of a middle ground without the feeling that you'll ruin him.
Gifts above the annual limit ($15k) do not get taxed unless the cumulative exceeds $5.6 million. You just have to file a form.
Will that not use up part of the estate tax exemption that the OP might be paying? And note both spouses can give money to the kid.
The estate tax exemption for a couple is now $22.4 million, so not an issue for most folks.

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Re: Should I Dump a Pile of Money on Young Son?

Post by PhilosophyAndrew » Fri Jul 20, 2018 10:28 am

OP, here’s my advice: if you don’t trust your son to handle the gift, keep the inheritance and plan to develop a comprehensive estate plan once your estate becomes large enough to generate inheritance tax.

If you trust your son to handle the windfall, provide it with modest advice but without heavy strings attached. Once you pass on the inheritance to him, it should be viewed as his to do with as he wishes. If you can’t handle his using the inheritance in ways you dislike, then accept it as part of your estate.

Andy.

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Re: Should I Dump a Pile of Money on Young Son?

Post by Dottie57 » Fri Jul 20, 2018 10:33 am

Grt2bOutdoors wrote:
Fri Jul 20, 2018 10:10 am
Dottie57 wrote:
Fri Jul 20, 2018 10:01 am
letsgobobby wrote:
Fri Jul 20, 2018 9:41 am
Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.
If you’ve ever seen someone receive a large amount and go nuts, you would know. Money does change people, especially if acquired fast.
Would it change your mind that this young man will be flying multi million dollar pieces of technology, now if not in the future?
No. Money can change people in unexpected ways.

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Cycle
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Re: Should I Dump a Pile of Money on Young Son?

Post by Cycle » Fri Jul 20, 2018 10:40 am

My parents paid for my college education. Since I had a scholarship I got to keep the extra money which I used to buy a condo when I was 24. My siblings went to a fancier school and had no money left after graduation.
That's probably a 150k worth of gifts. I paid for my graduate degree (and work contributed as well).

I turned down a full ride via NROTC, bc my parents said I could decide when I graduated whether or not I wanted to join the service. Upon graduation, I decided to enter the workforce as an engineer.

Despite having been gifted a 150k in education money, our household is a prodigious accommodation family. We save 75% net. We'll likely inherit a couple MM after retiring at 2% SAWR. I think my parents think we are poor, based on our frugal and under the radar lifestyle.

I think if you told your son to leave it in TSM or equivalent for 15 years, he would do so. Tell him it's an order and verify he has done so every year.
Last edited by Cycle on Fri Jul 20, 2018 10:52 am, edited 1 time in total.

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Re: Should I Dump a Pile of Money on Young Son?

Post by Doom&Gloom » Fri Jul 20, 2018 10:43 am

It sounds like he wants to "do it on his own." Be proud, save & invest the inheritance wisely, and pass it on to him at a later date.

randomguy
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Re: Should I Dump a Pile of Money on Young Son?

Post by randomguy » Fri Jul 20, 2018 10:43 am

Rupert wrote:
Fri Jul 20, 2018 10:27 am
randomguy wrote:
Fri Jul 20, 2018 10:22 am
munemaker wrote:
Fri Jul 20, 2018 9:59 am
lostdog wrote:
Fri Jul 20, 2018 9:57 am
annielouise wrote:
Fri Jul 20, 2018 9:53 am
I would absolutely feel comfortable giving the son you described this money. He has already shown that he is a responsible adult. I would offer to discuss how he should handle the money, but I would ultimately leave choices up to him.
+1

Or you could gift him yearly the the max limit before it gets taxed. I think it's around 13k or 14k yearly. Kind of a middle ground without the feeling that you'll ruin him.
Gifts above the annual limit ($15k) do not get taxed unless the cumulative exceeds $5.6 million. You just have to file a form.
Will that not use up part of the estate tax exemption that the OP might be paying? And note both spouses can give money to the kid.
The estate tax exemption for a couple is now $22.4 million, so not an issue for most folks.
OP mentioned that estate taxes maybe an issue. I dont know if they are counting on 20 million or having the max revert back in 7 years if Congress doesnt extend the cuts. Projecting out 30 years though makes this a total guess. And of course state laws also matter

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Re: Should I Dump a Pile of Money on Young Son?

Post by Grt2bOutdoors » Fri Jul 20, 2018 10:46 am

Dottie57 wrote:
Fri Jul 20, 2018 10:33 am
Grt2bOutdoors wrote:
Fri Jul 20, 2018 10:10 am
Dottie57 wrote:
Fri Jul 20, 2018 10:01 am
letsgobobby wrote:
Fri Jul 20, 2018 9:41 am
Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.
If you’ve ever seen someone receive a large amount and go nuts, you would know. Money does change people, especially if acquired fast.
Would it change your mind that this young man will be flying multi million dollar pieces of technology, now if not in the future?
No. Money can change people in unexpected ways.
What I've found is that others change when they have thoughts that you may have money, may earn more money then they do or you are more knowledgeable about personal finance (even though you may or may not have any money to speak of). Those who earn their money or who have a deep understanding and appreciation of how and where the money was attained, they don't change.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Ben Mathew
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Re: Should I Dump a Pile of Money on Young Son?

Post by Ben Mathew » Fri Jul 20, 2018 10:53 am

I recommend disclaiming and let it pass on to your son, for the following reasons:

1. He is financially responsible.

2. Since you are concerned about estate taxes, sounds like you might leave him with an even larger inheritance later on. Why lump it all together? Better $1 million now and $X million when you pass, than $XX million when you pass.

3. Giving him the $1 million now will help him max out all his tax advantaged accounts, buy a house mortgage-free, etc., and so on. The $1 million now will provide a bigger bang for the buck now than later.

But, don't set any restrictions on how he should use the money. Provide advice, but no restrictions. The advantage to your son of having the $1 million this early in life is that it can improve his life if allocated well.

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Re: Should I Dump a Pile of Money on Young Son?

Post by bsteiner » Fri Jul 20, 2018 10:56 am

You should yell and scream at the lawyer who planned your mother's estate. He/she should have had your mother leave your share to you in a trust that you control, and that would be out of your estate, rather than outright. That way, you wouldn't have to choose between accepting it and having it in your estate for estate tax purposes, or disclaiming it and having it pass to a 24-year-old outright.

You know your son better than anyone else except perhaps your wife, so you can estimate as best you can the risk that he dissipates it, or gets divorced and loses some of it in the divorce (inheritances are subject to equitable distribution in about 1/4 of the states, and in the other states it's often hard to trace the money), or outlives his spouse and remarries, or has a creditor problem. You'll have to weigh that against the likelihood of estate tax in your estate (making your best guess since there's no way to know the size of your estate or the tax law 30 or so years from now).

While you can't require your son to do so, you could ask him if he would be willing (if you disclaim) to put some of the money in a trust for his benefit that someone else (such as your wife) would control now, but that he would receive at, say, age 30 or 35 (or part at 30 and the rest at 35).

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Re: Should I Dump a Pile of Money on Young Son?

Post by Spirit Rider » Fri Jul 20, 2018 11:02 am

Thegame14 wrote:
Fri Jul 20, 2018 8:32 am
Why don't you set up a trust and put rules into place, like he can only take out the gains for the next so many years, or can only take out a certain dollar amount of principle each year.
+1

OP, I would take the $1M inheritance from mom and setup a $1M irrevocable trust with your son as beneficiary. The $1M will reduce your estate/gift tax lifetime exclusion, but removes 30 years of gains from the estate. Each spouse could additionally gift the annual exclusion (2018 = $15K) each year to the trust to further reduce any future potential estate taxes. However, as already pointed out the current lifetime exclusion is $11.2M/person increasing each year by inflation.

The trust should be somewhat discretionary (house down payment ) and at least make tax effective income distributions. I would make 1/3 of the trust distributable in 10 years and the remainder in 20. That would prepare him better for any eventual inheritance in 30.

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Re: Should I Dump a Pile of Money on Young Son?

Post by letsgobobby » Fri Jul 20, 2018 11:06 am

Dottie57 wrote:
Fri Jul 20, 2018 10:01 am
letsgobobby wrote:
Fri Jul 20, 2018 9:41 am
Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.
If you’ve ever seen someone receive a large amount and go nuts, you would know. Money does change people, especially if acquired fast.
Does money always change everybody?

DragonJoey3
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Re: Should I Dump a Pile of Money on Young Son?

Post by DragonJoey3 » Fri Jul 20, 2018 11:10 am

letsgobobby wrote:
Fri Jul 20, 2018 11:06 am
Dottie57 wrote:
Fri Jul 20, 2018 10:01 am
letsgobobby wrote:
Fri Jul 20, 2018 9:41 am
Rupert wrote:
Fri Jul 20, 2018 8:25 am
No you should not dump a pile of money on your young son. He's doing great, and you might ruin him with it. The wrong sorts of people may become attracted to him (they seem to be able to smell money on a person). See an estate planning lawyer for help in preserving and protecting that money for your son.
Why do your response and so many of the others assume that giving the money later will ruin him less than giving the money sooner? He's already demonstrated enormous maturity and judgment especially for his age.
If you’ve ever seen someone receive a large amount and go nuts, you would know. Money does change people, especially if acquired fast.
Does money always change everybody?
I like the way that Dave Ramsey put it (not advocating for DR, I know how people can feel about him here):

"Money is like an amplifier, it makes someone more of what they already are. If you were a butt-hole before you got money, you'll be a huge butt-hole with lots of money. If you were a generous person before you got money, you'll be an even more generous person with lots of money."

I think in OPs case he should consider the character of his son, is he at a point in maturity where he would understand how to manage that much money. Because if you are an immature child with a little money, you'll be a really immature child with a lot of money.

robebibb
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Re: Should I Dump a Pile of Money on Young Son?

Post by robebibb » Fri Jul 20, 2018 11:11 am

munemaker wrote:
Fri Jul 20, 2018 9:59 am

Gifts above the annual limit ($15k) do not get taxed unless the cumulative exceeds $5.6 million. You just have to file a form.
If OP is worried about hitting the estate tax limit it would be best to keep gifts below the annual limit. Any gift above annual limit counts against estate tax limit. If OP is married and money is in joint account I believe he could gift 2x the limit annually.

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BolderBoy
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Re: Should I Dump a Pile of Money on Young Son?

Post by BolderBoy » Fri Jul 20, 2018 11:13 am

klneutral wrote:
Fri Jul 20, 2018 7:55 am
Upon son's graduation, wife and I offered to pay half of new car. He declined and said he is fine with the 22 year old car we had given him and that he continues to drive, with no A/C, in TX.
I'd be worrying about his sanity.

Sounds like you raised a great guy and he'd likely do just fine with the $1 million. (with more advice from you)
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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Re: Should I Dump a Pile of Money on Young Son?

Post by metrunt » Fri Jul 20, 2018 11:13 am

We have zero idea what the estate tax situation is going to be like in 2048. There will be plenty of moves to make in 20 years based on reality, not projection.

If you want to give your kid a million bucks and avoid filing a gift return, go for it, with no strings attached. He sounds completely mature enough to handle it.

But don't try to plan around an imaged tax future.

Rupert
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Re: Should I Dump a Pile of Money on Young Son?

Post by Rupert » Fri Jul 20, 2018 11:15 am

letsgobobby wrote:
Fri Jul 20, 2018 11:06 am

Does money always change everybody?
No, but compare the secretary who accumulates millions over time to the typical lottery winner.

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