What do I owe my children?

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Nowizard
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What do I owe my children?

Post by Nowizard » Tue Aug 06, 2013 10:28 pm

We have two children who have completed a doctorate and MBA, and we paid expenses for the one earning a doctorate and an equal amount for the second child. His costs were greater since the first child had an assistantship, and we loaned the second child $35,000 to cover the remainder of his expenses. The first child is now married and very stable financially due to his wife's assets, primarily. The second child is well employed and making monthly payments on his loan. A key fact is that we have always attempted to provide equally for our children. We are now wanting to forgive the remaining ($32,000) debt of the second child but are struggling with the concept of having always equalized what we have provided for each child. The first child's wife has no need to work due to her inherited assets, and he has easily traveled, taken substantial vacations when a child was born, etc. In other words, they do not need the money. The first child is engaged to a woman completing her MBA and who is paying for it herself with savings from prior employment. They will buy a house, a second car, etc., and they will have substantial incomes since both will have MBA's from prestige schools. They are currently leading a "student life" that is not opulent, but not overly Sparta, due to my son's employment but have nowhere near the assets of the other son.

The above is a rather tediously detailed description, but the question is this: Should we give the first son $32,000 also if we forgive the debt of the second son? We can afford to do that, but think that the "equalization" issue does not meet "To each his own need" concept, but does meet the history of support within our family. Comments on this problem many would like to have is appreciated.

Tim

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Kalo
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Re: What do I owe my children?

Post by Kalo » Tue Aug 06, 2013 10:40 pm

You could offer to suspend the payment requirement indefinitely in exchange for a true-up upon inheritance. I realize the first child doesn't need the true-up but it seems likely that neither couple will need any of the inheritance when the time comes anyway. Solves the problem of treating each child equally but also gets the younger child out from under the repayments. Still favors the younger child if you consider the time value of money, but it's all just dust in the wind in the long run. Main thing is to avoid hard feelings I'd say. Any way you can work it and still do that is good.

Kalo
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Mill
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Re: What do I owe my children?

Post by Mill » Tue Aug 06, 2013 10:45 pm

You don't owe your children anything.

But what to do in this situation?...tough question. In my mind, The Millionaire Next Door book seems like it may offer some guidance.

Best wishes.

WL2034
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Re: What do I owe my children?

Post by WL2034 » Tue Aug 06, 2013 10:53 pm

Coming from someone who is approximately the age of your children, I'm guessing (30), I don't feel like you owe it to them to be equal. If the amount in question was a truly life altering amount, I would probably feel differently because it would likely add a lot of stress to the family dynamic. You are talking about forgiving a small-moderate sized loan (in relation to your family's total assets), which would help out your child and help him get a head start saving for the future. I don't think this should upset your older child. It sounds like he is independent and living quite comfortably, due in no small part to you raising him and allowing him to graduate without any loans. You did your job.

The real question is how does it affect the family dynamic. You can probably judge better than any of us how your kids will respond. Will the first child hold it over the second child's head in the future? Will he silently brood about it? Just because people don't need the money doesn't mean they don't feel entitled to it in some circumstances. Perhaps you should ask your second child how he feels about forgiving the loan, as he might not want what he considers a handout depending on the relationship between the two brothers. I think it is fine to forgive the loan, but it's really a judgement call based on how you see it playing out, IMO.

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Re: What do I owe my children?

Post by Parthenon » Tue Aug 06, 2013 11:10 pm

After the second daughter finished college she went for a masters. After she completed it I paid off her federal loan before she started payments and gave the first daughter the same amount.

When each got married they both received the same amount toward expenses.

When daughter number two wanted to buy a house with her boyfriend I gifted her $100,000 to match her partners contribution so they would be equal from the start. Daughter number one was pleasantly surprised with her $100,000 gift.

Because both are responsible adults, not profligate spenders, I felt giving them what they will eventually inherit today was a good option. They have more need of it now than later on when both are well off.

My wife and I chose to be scrupulous in giving them money all their lives and we continue to do so. It's really up to you. Everyone does it differently. You know your kids better than anyone; are they deserving?

Ed
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Re: What do I owe my children?

Post by jmg229 » Wed Aug 07, 2013 12:25 am

Kalo wrote:You could offer to suspend the payment requirement indefinitely in exchange for a true-up upon inheritance. I realize the first child doesn't need the true-up but it seems likely that neither couple will need any of the inheritance when the time comes anyway. Solves the problem of treating each child equally but also gets the younger child out from under the repayments. Still favors the younger child if you consider the time value of money, but it's all just dust in the wind in the long run. Main thing is to avoid hard feelings I'd say. Any way you can work it and still do that is good.

Kalo
First off, I agree that you don't "owe" them anything. But, given the history of equal treatment, I like this idea. Or, even better, I think, is offer the other son the option to take $32,000 now or to have it settled in an inheritance. If he is actually in that good of shape, he may choose the latter route or say, essentially, "don't worry about it". And, as you said, it won't matter substantially to you.

It sounds like your family is pretty open about money issues, so probably bringing up these few options would avoid any hard feelings. Odds are, your sons will appreciate your generosity and make this a positive discussion.

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dgm
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Re: What do I owe my children?

Post by dgm » Wed Aug 07, 2013 12:45 am

i say to each his own.

i am most likely closer to your kid's age and have told my parents all of their assets should go to my siblings.

i don't need it. they could use it. i feel no sense of "unfairness" about this. i would not be where i am today without them.

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Re: What do I owe my children?

Post by Call_Me_Op » Wed Aug 07, 2013 5:39 am

Don't give either of them any more money or any breaks on existing loans. Problem solved. By holding your kids' hands and paying for everything, you are ultimately not doing them any favors. My folks couldn't afford anything and I put myself through college by working, and earned every cent I have. I am all the better for it.
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Cernel
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Re: What do I owe my children?

Post by Cernel » Wed Aug 07, 2013 6:20 am

Tim,
First of all, congratulations to you and your wife for raising two, apparently, responsible children.

I find myself in a similar situation, in that, my wife and I are currently following a strategy of equal distribution of our inheritance to our three children. But as each of them follow their own life's path, their needs may certainly be different in the future and that begs the question: Do we help out financially by maintaining an equal distribution strategy or do we help out based on need?

If and when those needs become different our plan is to sit down with each of our children, individually, and have a discussion concerning the potential for a change in strategy. The last thing that my wife and I want to do is destroy or negatively impact what we believe is a healthy and wonderful family dynamic. So it will be important to us to know how any change might affect the children.

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Re: What do I owe my children?

Post by adios_logic » Wed Aug 07, 2013 6:33 am

I agree with those advising you to talk to both of your children. I have had similar conversations (on the child end of it) and when you are able to explain that you are trying to be fair (which doesn't necessarily mean you always do the same thing for both of them) and do the right thing to help them out, the chances of it going poorly are low.

carolinaman
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Re: What do I owe my children?

Post by carolinaman » Wed Aug 07, 2013 6:38 am

I think that your equalization is a general principle but that circumstances could cause you to do something like forgive the $32k loan to the one child without doing something equivalent for the other child.

I have 2 children, ages 44 and 40. One is in much better financial shape than the other and she and her husband recently got a nice inheritance from her FIL. The other child has struggled due to a failed business and that his skillset/trade is in a part of the economy that continues to struggle. Both work hard and are not frivolous with their money. I have provided some help to the one struggling and will continue to do so. I have never discussed this with the other child but I know she would agree with it because she is genuinely concerned about her sibling. It would be different if the other child were lazy, irresponsible or extravagent in their spending.

I do applaud your concern about this but I think substituting an equalization principle with a fairness principle, which takes into account the context of each child's situation and needs and providing assistance/support commensurately is a better way to go. Just my opinion.

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Re: What do I owe my children?

Post by MnD » Wed Aug 07, 2013 7:27 am

Sounds like both kids are in a fantastic situation and will go on to live lives economically that are in the top 1% at least.
The loan was agreed upon by 2nd child and the simplest solution would be for him to continue to repay it.
Doing otherwise might just open up a can of worms.

My father was a huge proponent of equalization. Out of 5 kids only one was lent money following undergraduate education (for her professional degree).
A formal note was drawn up and my sister repaid it. The other 4 kids were made aware of it.

Inheritance was done on a completely equal basis with full cash adjustment for those receiving more or less personal property.
My brother and I sent out the spreadsheet detailing that cash, securities and property summed to the exact same value for each child.

During the equalized process of providing for expenses for education for 5 children while my parents were alive, and during and after the distribution of a large estate to five households, I never heard one bad word from any sibling about anything financially related. Not one complaint or even a single comment in passing.
Compared to the conflicts over money that often arises in extended households over family support, I'd have to say I'm a big fan of equal treatment. :happy

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Re: What do I owe my children?

Post by Caduceus » Wed Aug 07, 2013 7:39 am

If there's at all a risk that unequal gifting might introduce seeds of envy/discord (again, not necessarily in monetary terms but also emotionally), personally I don't think it's worth it. One of my best friends had a grandparent who left an entire house to the eldest child (who was struggling financially), and very little else to the rest of his children (including my friend's parent), who were by all accounts doing very well financially and didn't need the money.

But even though it seemed logical to do this (in the sense that there was a rational basis to the will that every one could perceive), the inequality of that will split the family long after death. It's not unreasonable for any other of the children to have thought (even if wrongly) that there was some favoritism going on. Was one child more loved/valued?

No easy solutions ... but I think even some kind of pre-emptive conversation about the "why" behind the division would have helped the family stay together better.

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prudent
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Re: What do I owe my children?

Post by prudent » Wed Aug 07, 2013 7:40 am

If one child proactively says it's OK to give more to other siblings like dgm did, then no worries. I think that's wonderfully unselfish.

But there are so many cases where even though one child needed help more, the other child(ren) resented the inequality and that can cause long-term dissension in the family. I don't really understand that, because you'd think the well-off child would be happy for the less-fortunate siblings instead of resenting any perceived unfairness. Kids always seem to think if there is unequal gifting, the favored child MUST have manipulated the parents in order to come out ahead.

The idea mentioned earlier about helping one child more now, and doing a true-up at inheritance time seems to be a fine way to balance it out.

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Re: What do I owe my children?

Post by Call_Me_Op » Wed Aug 07, 2013 7:47 am

prudent wrote: I don't really understand that, because you'd think the well-off child would be happy for the less-fortunate siblings instead of resenting any perceived unfairness.
As a son in a large family, I can explain it. Even if intellectually you know it is justified (for your parents to give more to those who have less) - it still feels like the parents favor that child over you. Given that out bonds with our parents go back to birth and early childhood, this is not entirely surprising.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: What do I owe my children?

Post by Grt2bOutdoors » Wed Aug 07, 2013 7:52 am

I would give child one the $32K, irrespective if he married into money or not. From what you've written, I'm sure your first child has a successful marriage, but is their family wealth in both names held jointly or is it in the wifes name? My point is, the wealth might belong to the wife and as long as the status quo remains, your son will benefit from his wife's wealth. However, if down the road, something were to happen your son will not be as well off as he is today. To keep things equal, I would continue with your previous history and gift it to son number one.
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Re: What do I owe my children?

Post by Grt2bOutdoors » Wed Aug 07, 2013 7:54 am

Call_Me_Op wrote:
prudent wrote: I don't really understand that, because you'd think the well-off child would be happy for the less-fortunate siblings instead of resenting any perceived unfairness.
As a son in a large family, I can explain it. Even if intellectually you know it is justified (for your parents to give more to those who have less) - it still feels like the parents favor that child over you. Given that out bonds with our parents go back to birth and early childhood, this is not entirely surprising.
+1 While you come from a large family, as do I, the feeling you described is also found in smaller sized families - the perception of favoritism is found everywhere, unfortunately.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: What do I owe my children?

Post by KyleAAA » Wed Aug 07, 2013 8:18 am

It depends much more on how the kids feel than how you feel because if there's any animosity down the road they are going to have to deal with the consequences, not you. Do you want to create a situation where your children might harbor resentment for each other after you're gone? The first son may not need the money, but that doesn't mean he doesn't feel like he should receive equal treatment, which would be reasonable considering the precedent you've set. Were it me, I'd just do nothing. A $32,000 loan for two highly-paid MBA graduates isn't going to take long to pay off, anyway. I doubt it's causing your son any hardship and even if it is, as soon as his wife starts working they'll likely be able to pay it off within a year. If it ain't broke, don't fix it. Not worth the potential trouble in this case.

That said, I think if you decide to forgive the $32,000 loan you should probably give the other child an equal amount of money. You've set the precedent that you give equally to both. Surely they've noticed that. What do you think would be the reaction if you suddenly stop giving equally to one child in favor of the other? I know if I were the first child, I would feel slighted.

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Re: What do I owe my children?

Post by Nowizard » Wed Aug 07, 2013 8:24 am

First, my apologies for a couple of grammatical errors. The post was written just before bed and after a discussion with my wife. Second, thanks for the comments. They all make reasonable points.

One issue is that our first son lives a life well beyond what his salary as a university employee would provide. Personally, there would be some angst about that, even though there are no signs of that from either party other than he never questions her expenditures which are well within their ability to cover but sometimes more than he would have chosen. The main issue for us is the family dynamic, as several have mentioned. Both boys are very responsible, generally know of our financial circumstances and have voiced that they want us to spend without considering them or an inheritance. That is the cognitive statement, but the emotional one may differ. The issue of the first son feeling we emotionally favor the second son has arisen at a low level. Frankly, the first son was more of the favored one during the formative years while it is easier to relate to the second son presently. At the moment, the option to discuss with both, give equal amounts to each or equalize at the time of inheritance have appeal. Our sons are in their early to mid-30's if that makes a difference. There is also the dynamic of the feelings of my wife to consider should there be a difference of opinion. We have also had equal roles in arriving at our current financial position which is above what our incomes would have projected due to prudent spending and fortunate investments. Any further comments will be appreciated.

Tim

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Re: What do I owe my children?

Post by mptness » Wed Aug 07, 2013 8:57 am

I agree with those who say you don't owe your children anything in this situation. Plenty of students put themselves through college and or graduate school. Many parents are not in a position to help them in this way. And if you are in a position to offer financial help I see no reason that it has to be equal if one of your sons or daughters have a greater need. In my case, my son graduated with no debt and had excellent scholarships. My daughter who also had scholarships and worked just as hard or harder graduated with some debt. I plan to help her as much as I can, but my son doesn't have the same need, nor can I afford to gift him an equal amount. I believe he can and will understand this. They will each receive equal inheritances when we die.

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Re: What do I owe my children?

Post by Outer Marker » Wed Aug 07, 2013 9:07 am

I'd forgive the debt for child 2 and be done with it. You will have provided both an equal, debt free start in life unburdened from school debt. Circumstances made that less costly and currently less important for child 1; I wouldn't let that stop me from allocating a few extra resorces where it will do the most good. We're not talking about a huge sum of money in the long run -- but it can make a big difference to someone young starting out.

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Re: What do I owe my children?

Post by NoVa Lurker » Wed Aug 07, 2013 9:13 am

OP - I wouldn't normally advise this, but you may be the rare case where it makes sense to talk LESS about finances with your kids, at this point.

First, you no longer owe either of them anything financially.

If you don't need the $32k loan repaid and you want to forgive it, then forgive it. At this point, it has nothing to do with your other son. Why create extra drama by bringing it up with any family member other than your second son?

You could easily spend $32k on something for yourselves, and your adult children would have nothing to say about it, as long as you and your spouse are able to support yourselves for the rest of your life. Similarly, it is your choice what you want to do in your will/trust.

Awhile back, we gave some money to a family member. We did not bring it up with any other family member. Maybe some family member could perceive it as "unfair," but it is our money, not theirs.

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Re: What do I owe my children?

Post by NoVa Lurker » Wed Aug 07, 2013 9:16 am

Nowizard wrote:There is also the dynamic of the feelings of my wife to consider should there be a difference of opinion.
Tim
Notwithstanding the advice above -- if your wife feels differently, you can try to persuade her, but ultimately, do what your wife wants!!

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Re: What do I owe my children?

Post by bottlecap » Wed Aug 07, 2013 9:18 am

There are valid arguments for handling this every which way. My advice would be to decide how you want to handle it and, if it involves forgiveness of the loan, make clear your rationale and don't waiver. In the end, after all, it is your money. Do what you think ahould be done and let both parties know about it.

JT

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Re: What do I owe my children?

Post by Leesbro63 » Wed Aug 07, 2013 9:28 am

I like the equalization at death thing. I am in a similar situation although my kids are younger but not children. We try to be absolutely equal with everything we do, but not necessarily how we do it. Even with the "at death" thing do you factor in inflation? If it's 30 more years until you and your wife are gone, do you make the $35,000 increase with the Consumer Price Index? What if your portfolio tanks and the there is huge inflation? What started as a manageable loan will have turned out to be an inheritance-eating monster. Perhaps make the repayment be $35,000 in current dollars and you, manually, increase that amount in your will after reviewing every 5 years or so. I am just thinking out loud.

Another idea is to talk to the richer child and mention that they could disclaim or ignore this part. If there is a good sibling relationship it might work fine. If not however you might be causing a permanent rift.

The other option is to gift $35,000 to the richer child now, explaining why. Perhaps that child will say "no dad, you keep it". Or not.

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Re: What do I owe my children?

Post by TSR » Wed Aug 07, 2013 9:46 am

My brother and I are in our mid-30s. My (divorced) parents are both wonderful, but their efforts to be overly "equal" with things often leads to eye-rolling moments where my mom is trying to portion out food equally over the dinner table just like she did when we were ten years old. This always seems silly to us because, well, because we're adults. My brother has a wife and two kids. I don't. I expect that my dad will want to subsidize some of my brother's family's expenses (even though my brother doesn't need him to), and my dad may or may not tell me about that -- it's none of my business, really.

That's how my family works. I've also seen families where people count every penny, where siblings have stopped talking to one another after the death of a parent because they have learned of certain inequalities, etc. It sounds like you have done well to raise intelligent, financially aware children, and you can probably trust them to deal with this intelligently. I'd speak to them, and, as one poster suggested, tell the other son about your loan-forgiveness plan and ask him if he'd like you to make provision to true it up in your will. He will likely say "don't be silly," and the suggestion of some modest expenditure to add to or amend your will should make this an even easier call.

Best of luck. Sounds like you have given far more than you "owe" to your children, and it sounds like it has paid dividends. Be proud of that.

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Re: What do I owe my children?

Post by minneapples » Wed Aug 07, 2013 10:02 am

Nowizard wrote:Both boys are very responsible, generally know of our financial circumstances and have voiced that they want us to spend without considering them or an inheritance. That is the cognitive statement, but the emotional one may differ. The issue of the first son feeling we emotionally favor the second son has arisen at a low level. Frankly, the first son was more of the favored one during the formative years while it is easier to relate to the second son presently.
I think there is a difference between wanting one's parents to enjoy their later years without worrying about having something left over for an inheritance, versus feeling that, if one's parents do choose to make financial gifts to their children, those gifts should be distributed in an equal-ish manner. It is perfectly reasonable for a child to hold both of those desires at the same time, especially if they feel like money gifts are linked to favoritism. I say equal-ish because sometimes one sibling genuinely needs more than another, and in those cases my own belief is that genuine need should always take a back seat to sibling rivalry. But here it doesn't sound like either one of your children needs $32k. It might be nice for your second son to not have that monthly expense, but you haven't mentioned that repaying his debt is causing him any particular hardship. I don't get the sense that you consider living like a student for a short, finite period of time to be a hardship. It sounds like your first son already feels you favor his brother -- and at least in one sense, he is correct (in that you relate better to his brother). I wouldn't add fuel to that fire, not without, for example, making clear to your first son that it will all be a wash after your estate is executed.

Of course you have a perfect right to do with your money as you like, but I would not unnecessarily sacrifice relationships with family members just to prove that point. Not worth it, in my book.

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Re: What do I owe my children?

Post by Sam I Am » Wed Aug 07, 2013 10:19 am

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Re: What do I owe my children?

Post by Luke Duke » Wed Aug 07, 2013 10:31 am

I'm one of 7 children and the notion that everything needs to be equal baffles me. Some of us went to private school, some didn't. Some of us went to college, some didn't. Those that went to college got varying amounts of support (I suspect that I got the least and it doesn't bother me one bit). In fact, I assumed some credit card debt to avoid asking my parents for money. Some of us got some help with our first vehicle, some didn't. My youngest sister (33) probably still gets help from my parents, while none of the others do. We are all still very close (4 of us live within 0.5mi of our parents) and any inequality in what our parents gave us doesn't ever cross our minds. We all got everything that we needed.

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Re: What do I owe my children?

Post by arthurb999 » Wed Aug 07, 2013 10:59 am

I would forgive the loan and explain to the other child your reasoning. If they truly have signifiacnt assets due to inhertiance, 30k is a drop in the bucket...

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Jay69
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Re: What do I owe my children?

Post by Jay69 » Wed Aug 07, 2013 12:06 pm

How about this, you forgive the loan with the understanding that they use some of the cash to have some good old family dinners for all of you, that is if you don't need the cash, they all get along and live near by . Tell them that's my wish and what I would like to see. Its a good excuse to get together anyway.

In the end all we have is family, $35k would buy a good amount of pizza and beer!
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Re: What do I owe my children?

Post by bta15 » Wed Aug 07, 2013 12:18 pm

My feeling is that this is a school related debt. I'm guessing when you started on this journey of parenthood you wanted to provide your kids with an education. I think forgiving this debt is very reasonable and you do not ]owe anything to the other sibling.

Alternatively, I think a great middle ground solution is forgive half the debt, and have them pay their sibling the other half (or they can give it to you and you can give it to the sibling).

Then both benefit and you don't have to give up more of your money.

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Re: What do I owe my children?

Post by Jeanz » Wed Aug 07, 2013 12:46 pm

Sam I Am said it first, but as you try to decide how to handle gifts to your children I hope you remember that even people who seem to be financially secure are subject to the whims of fortune. Divorce, illness, disability, a child with expensive special needs -- all these things could happen to either of your children, and in that case money you kept under your own control would be of greater help to them.

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Re: What do I owe my children?

Post by Kosmo » Wed Aug 07, 2013 12:47 pm

Diametrically opposed to what most are suggesting...in my mind, the fairest thing you can do is to loan the 1st child $35,000. If he doesn't want the loan, fine; let things continue as they are. No one can say you weren't trying to be fair.

Being on the child side of the situation, my parents have loaned me money (paid back in full plus interest) and gifted me money. Most recently they gifted money towards the down payment on a house. My brother is now looking to purchase a house and I fully expect they will treat him the same way. I would feel cheated if they didn't.

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Re: What do I owe my children?

Post by Professor Emeritus » Wed Aug 07, 2013 1:01 pm

Call_Me_Op wrote:Don't give either of them any more money or any breaks on existing loans. Problem solved. By holding your kids' hands and paying for everything, you are ultimately not doing them any favors. My folks couldn't afford anything and I put myself through college by working, and earned every cent I have. I am all the better for it.
right We told our grandson to hustle out and get a job soon. The kid is a layabout who expects everything to be handed to him. In six months he will be a One Year old and still has no idea what it takes to earn a living.

Historically people have moved up in economic class largely because someone invested in either physical or human capital for them when they were young.

You and I may have survived making it on our own, but that in no way makes it an optimum strategy.

Ciel
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Re: What do I owe my children?

Post by Ciel » Wed Aug 07, 2013 1:32 pm

My opinion - Forgive the loan for the second child, and don't talk about it with the first. It's not like it has to be a secret, but it's really not the first child's concern. Your second child is in a position where they would greatly benefit from such a gift - the first is not. If for some reason circumstances change for your first child (sounds very unlikely), then maybe you can reassess then. I think it would be silly to give an identical gift to the first child for the sake of equality in this scenario.

My parents have helped me financially at times, and they've helped my sibling at different times. Each of us has been in very different situations post- high school, and our parents have helped us with our own unique circumstances. I honestly don't know who has been "helped more", but I don't care at all. Not everything has to be equal.

Someone mentioned reading the Millionaire Next Door as a guide for the situation, but I disagree. That book talks about "economic outpatient care" in a way that warns of enabling poor financial behavior - which I think is good advice. That doesn't sound like it applies to this situation at all, though. It sounds like child #2 has been responsible so far and could benefit from forgiveness of this loan without encouraging bad financial decisions.

billern
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Re: What do I owe my children?

Post by billern » Wed Aug 07, 2013 1:43 pm

arthurb999 wrote:I would forgive the loan and explain to the other child your reasoning. If they truly have signifiacnt assets due to inhertiance, 30k is a drop in the bucket...
I disagree. Fair is fair and need based gifting to children often causes resentment and other problems.

I'd at least offer the other child the money while expressing a desire to keep things equal between the siblings. If they don't want it, they can express that. At least they had the option to receive the money and they know their parents want to treat them similarly.

enderland
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Re: What do I owe my children?

Post by enderland » Wed Aug 07, 2013 1:48 pm

It sounds like you are going to feel bad if you don't provide equally for them.

This to me is reason enough to consider not doing it. It also sounds like it isn't a big deal financially to either of them.

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Re: What do I owe my children?

Post by Nowizard » Wed Aug 07, 2013 2:04 pm

NovaL: Agreed. We have not discussed our financial situation at all for a number of years. I may mention that we "did well" with a current investment or that we are on track with an annual goal, but not even that commonly.

The comments sound like they reflect: 1. The probability of positive financial futures of our children, 2. We do not owe them anything, 3. Cognitively, it would be fine to forgive the debt without equalizing with the first son, 4. The key determiner is family dynamics and maintaining the positive relationships. Unfortunately, those are never fully known by us or them and can change without intent due to unintended consequences, just as equalizing has resulted in this unintended issue.

Tim

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Re: What do I owe my children?

Post by Grt2bOutdoors » Wed Aug 07, 2013 3:26 pm

Professor Emeritus wrote:
Call_Me_Op wrote:Don't give either of them any more money or any breaks on existing loans. Problem solved. By holding your kids' hands and paying for everything, you are ultimately not doing them any favors. My folks couldn't afford anything and I put myself through college by working, and earned every cent I have. I am all the better for it.
right We told our grandson to hustle out and get a job soon. The kid is a layabout who expects everything to be handed to him. In six months he will be a One Year old and still has no idea what it takes to earn a living.

Historically people have moved up in economic class largely because someone invested in either physical or human capital for them when they were young.

You and I may have survived making it on our own, but that in no way makes it an optimum strategy.
+1 Post of the day.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: What do I owe my children?

Post by Silence Dogood » Wed Aug 07, 2013 3:42 pm

I don't have a lot of money at all, but I always try to help people out when I can afford it.

Doesn't your older child want the best for his/her sibling?

IlliniDave
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Re: What do I owe my children?

Post by IlliniDave » Wed Aug 07, 2013 4:03 pm

Call_Me_Op wrote:Don't give either of them any more money or any breaks on existing loans. Problem solved.
I tend to agree with this, at least it's what I'd do. A deal's a deal. Were I the son in debt to you I wouldn't allow you to forgive the loan,actually. Been through that with my family (smaller amount though).

But, if you feel strongly about wanting to do something one way or the other that's okay too. Your money and your prerogative. Treating your children "equally" isn't the same as treating them identically. Even though they're grown men your actions in each one's life will almost certainly be different since their lives are unique.
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campy2010
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Re: What do I owe my children?

Post by campy2010 » Wed Aug 07, 2013 4:04 pm

My question to the OP is what would you have done if sibling #2's path through his MBA program had preceded sibling #1's PhD program. Would you have given sibling #1 extra money because his grad school cost less or would you have called it even with the reasoning that each received the education of his choice.

Framing the situation differently might help guide your decision.

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Re: What do I owe my children?

Post by Nowizard » Wed Aug 07, 2013 4:05 pm

The only comment with which I disagree fully are the ones that give variations of don't give them anything, I had to work, I told them that, etc. Any money given was contingent on performing academically, and the approach we used has pretty clearly worked in our case. Having come from a meager background, one that worked for me, I have wanted something better for my children. If others have found significantly different paths, congratulations, but there are different roads to Dublin, as Taylor often says. Thanks, again, for the comments.

Tim

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Re: What do I owe my children?

Post by Nowizard » Wed Aug 07, 2013 4:13 pm

Campy: Good comment. I feel certain we would have paid for all of an MBA education not covered by an assistantship, grant, etc. and had the same question to answer. The one thing I am certain of is that when this issue is completed, this approach will end. The comment that treating children equally does no mean identically is meaningful. The issue is really not one of child-rearing at this point. That is done. The issue is more one of emotional dynamics within the family and preservation/enhancement of adult/adult relationships with our children, their spouses and our grandchildren.

Tim

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Re: What do I owe my children?

Post by IlliniDave » Wed Aug 07, 2013 4:14 pm

Professor Emeritus wrote: Historically people have moved up in economic class largely because someone invested in either physical or human capital for them when they were young.

You and I may have survived making it on our own, but that in no way makes it an optimum strategy.
If you believe the research and conclusions of the authors of The Millionaire Next Door, in the recent past in this country that has not been the case on the whole. According to the authors, ongoing financial support to adult children by well-to-do parents statistically lowers their prospects for achieving high levels of financial success on their own. The largest statistical group to move up in class are still the self-made types who do it largely on their own. Maybe things have shifted dramatically in the last 30 years (book was published in the mid-1990s I think).
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Re: What do I owe my children?

Post by Leesbro63 » Wed Aug 07, 2013 4:19 pm

Call_Me_Op wrote: Historically people have moved up in economic class largely because someone invested in either physical or human capital for them when they were young.

You and I may have survived making it on our own, but that in no way makes it an optimum strategy.
+1 Post of the day.[/quote]

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tyrion
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Re: What do I owe my children?

Post by tyrion » Wed Aug 07, 2013 4:36 pm

IlliniDave wrote:
Professor Emeritus wrote: Historically people have moved up in economic class largely because someone invested in either physical or human capital for them when they were young.

You and I may have survived making it on our own, but that in no way makes it an optimum strategy.
If you believe the research and conclusions of the authors of The Millionaire Next Door, in the recent past in this country that has not been the case on the whole. According to the authors, ongoing financial support to adult children by well-to-do parents statistically lowers their prospects for achieving high levels of financial success on their own. The largest statistical group to move up in class are still the self-made types who do it largely on their own. Maybe things have shifted dramatically in the last 30 years (book was published in the mid-1990s I think).
If I recall correctly another observation from the book was that self made millionaires tended to want to push their children into careers (lawyer, doctor, professor, accountant, etc) rather than entrepreneurship because they knew firsthand exactly how difficult it was. And presumably because they saw competitors fail along the way.

Also keep in mind the fact that 'invested in either physical or human capital for them when they were young' does not equal 'ongoing financial support to adult children'.

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Re: What do I owe my children?

Post by IlliniDave » Wed Aug 07, 2013 5:28 pm

tyrion wrote: If I recall correctly another observation from the book was that self made millionaires tended to want to push their children into careers (lawyer, doctor, professor, accountant, etc) rather than entrepreneurship because they knew firsthand exactly how difficult it was. And presumably because they saw competitors fail along the way.

Also keep in mind the fact that 'invested in either physical or human capital for them when they were young' does not equal 'ongoing financial support to adult children'.
Yes, I think you're correct in terms of tendencies for the children of self made millionaires to enter professions of the type you mention, the rationale I thought tended to do with the feeling that that would give the children advantages the parent(s) did not have. The conclusion of the research is those children certainly had good and successful lifestyles but as a group weren't unusually likely to move higher up the economic ladder (move to a higher economic class) and accumulate wealth in proportion to their incomes. But there's not necessarily anything wrong with that. They do well for themselves.

That's a bit different of a group than those who's parents support an elevated lifestyle under the belief it will ultimately provide some advantage. That's the group that the authors say are the statistical group that significantly underachieves--the recipients of that type of help.

Maybe I understood "young" differently than it was meant. In context we're talking about two young men who've been well-raised and well educated (nothing wrong with that) and whose parents want to equalize this one last situation and asked opinions on what they still owed the young men. One respondent implied that at this point the parents didn't owe them anything further and that the young men had already received a lot more than anyone can argue they are owed. The poster I responded to disagreed and stated the best way to move up in economic class was through being supported by others in that endeavor. I'd agree that would apply if the boys were still children, but I don't think parents are doing a disservice by allowing two well-educated young men already professionally employed and living on their own to make their own way in the world. At this point, the research in question implies helping too much could become the disservice.

Of course in the end it's the parents' decision what they want to do with their money and how to resolve things, but I don't think it's fair to imply that they are hindering their children's ability to move up economically if they don't continue to provide money.

Edited to add: I'm not implying the converse either, that if they choose to forgive the loan and gift equivalent money that they'll necessarily be hurting their sons.
Last edited by IlliniDave on Wed Aug 07, 2013 6:38 pm, edited 3 times in total.
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Re: What do I owe my children?

Post by reggiesimpson » Wed Aug 07, 2013 5:32 pm

Hmmm very interesting. I just went through a similar situation with my two children (21 and 25). The philosophy of keeping it "balanced" is what i am referring to. My wife and i have a similar point of view regarding our children and it was emphasized in a book i lifted from this forum just recently. "Beyond the Grave" by Condon and Condon. About estate planning. I sat both of my children down and discussed our emphasis of giving equally to both. This was done in particular to prevent any riff between them that may take place during the reading of the will when the second parent dies (let alone in our lifetime). We all know that money magnifies problems and the way ones children think is not necessarily the way the parents think. So with that in mind i would follow your families philosophy of giving equally. If a family cannot do it now then think about balancing it out on your passing.
One other point i picked up in that book. Keep all third parties ( wives,husbands,grandchildren,accountants etc) far away from that reading of the will. They will likely only produce a riff i mentioned between your children. Thats the last thing most parents want on their passing!

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