Grandparents want to give to grandkids

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gadoc
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Grandparents want to give to grandkids

Post by gadoc » Tue Oct 17, 2017 11:18 am

Hello I have 2 small kids < 3 and my parents would like to gift them some money. What is the best way to do this. i have 529 accounts, they could technically deposit money directly in that. They mentioned opening a custodial account. My only concern is that i'm not sure I would want my kids to have access to several thousand dollars at 21. Not sure how mature they will be and I think it may actually hurt rather than help. Whats the best way to go about this?

Jack FFR1846
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Re: Grandparents want to give to grandkids

Post by Jack FFR1846 » Tue Oct 17, 2017 11:25 am

Are they ok with deposits into 529 accounts? This makes the intent of the money pretty clear. I'm not a fan of just giving money to kids.
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alex_686
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Re: Grandparents want to give to grandkids

Post by alex_686 » Tue Oct 17, 2017 11:27 am

529 plans would be my first choice.

If the grandparents wanted to do a UTMA I would be fine with that. In my experience, children having access to their own money is a maturing experience. If their money is controlled by somebody else they can shift responsibilities, and hence consequences, to a 3rd party.

gadoc
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Re: Grandparents want to give to grandkids

Post by gadoc » Tue Oct 17, 2017 11:29 am

They mentioned they would retain control of the money as the custodial until they felt the children were ready to recieve the funds. My understanding of custodial accounts is that at 21 they have full access to the funds regardless of whether or not the custodian deems they are ready for the money. is that correct?

delamer
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Re: Grandparents want to give to grandkids

Post by delamer » Tue Oct 17, 2017 11:31 am

The concern about your kids getting control of the money at 21 is overblown. My kids knew that there was money set aside for their college costs. They did not know that some was in UTMA accounts that they could access themselves. There was no need to volunteer that information, and they never asked.

NotWhoYouThink
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Re: Grandparents want to give to grandkids

Post by NotWhoYouThink » Tue Oct 17, 2017 11:32 am

You have come to the right place. There is total and universal agreement on this forum about the best way for grandparents to give money to grandkids, and keep everyone happy. Also overwhelming consensus on 529s and UTMAs.

Oh, wait. Ok, enter "grandparents" in the search bar and see the old debates.

Sentiment is nice, but family squabbles happen so they might need a rule. Maybe "give each grandkid $xK at Age Y." Or "give each grandkid $1K per birthday, or $100 per year old per birthday." The results will still depend on how the parent invests the money, and what the market does over the length of time they have this plan.

Maybe you have 2 kids and your siblings have 5, or none. Everyone ok with that? Maybe you let your kids buy cars with their money, and your siblings save theirs for college. Then grandma and grandpa help your kids with college costs.

Maybe grandma and grandpa die before all the grandkids are born, or before they all get to college.

Really, if it is anything more than pocket money it seems like a recipe for trouble, but families seem to manage it somehow. You know your family better than we do. What do you suggest?

NotWhoYouThink
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Re: Grandparents want to give to grandkids

Post by NotWhoYouThink » Tue Oct 17, 2017 11:37 am

delamer wrote:
Tue Oct 17, 2017 11:31 am
The concern about your kids getting control of the money at 21 is overblown. My kids knew that there was money set aside for their college costs. They did not know that some was in UTMA accounts that they could access themselves. There was no need to volunteer that information, and they never asked.
Well, maybe. I grew up without car seats or, for many years, seatbelts and I turned out ok. Does that mean there is no reason to use car seats or wear seat belts? I'm glad things worked out for your family, but not all families have happy stories to tell. Listen to the stories of kids dying from drug overdoses - no one saw it coming when the kids were in pre-school.

alex_686
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Re: Grandparents want to give to grandkids

Post by alex_686 » Tue Oct 17, 2017 11:48 am

gadoc wrote:
Tue Oct 17, 2017 11:29 am
They mentioned they would retain control of the money as the custodial until they felt the children were ready to recieve the funds. My understanding of custodial accounts is that at 21 they have full access to the funds regardless of whether or not the custodian deems they are ready for the money. is that correct?
Different states have different rules. Some are 18, others are 21.

barnaclebob
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Re: Grandparents want to give to grandkids

Post by barnaclebob » Tue Oct 17, 2017 11:56 am

I wouldn't worry about it too much. If your kid turns out to be impulsive or irresponsible just don't tell them that they have control of the account until they start doing their own taxes.

Grt2bOutdoors
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Re: Grandparents want to give to grandkids

Post by Grt2bOutdoors » Tue Oct 17, 2017 11:58 am

alex_686 wrote:
Tue Oct 17, 2017 11:48 am
gadoc wrote:
Tue Oct 17, 2017 11:29 am
They mentioned they would retain control of the money as the custodial until they felt the children were ready to recieve the funds. My understanding of custodial accounts is that at 21 they have full access to the funds regardless of whether or not the custodian deems they are ready for the money. is that correct?
Different states have different rules. Some are 18, others are 21.
Let's ensure we are talking about the same thing here.
A contribution to an UTMA account is an irrevocable gift to the beneficiary minor - it's their money. At the age of majority in state the account was opened in, the custodianship should be relinquished and the account re-registered in the now adult (former minor's) name. The UTMA is specific in that the custodian does not retain control of the money - that is not what irrevocable means. However, depending on sums involved, the grandparents could choose to establish a formal trust where they are the trustee and they can stipulate at the origination of trust when funds can be accessed by grandchild, but this would be somewhat more costly that just walking into a bank/mutual fund company and opening an account, it would require the services of competent legal counsel.

I use an UTMA for my child - most kids who become adults are not going out and blowing the money. If you instill in child that funds are for higher ed, school or first house enough times and start young, most likely you'll have a good outcome.
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PVW
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Re: Grandparents want to give to grandkids

Post by PVW » Tue Oct 17, 2017 12:04 pm

gadoc wrote:
Tue Oct 17, 2017 11:18 am
My only concern is that i'm not sure I would want my kids to have access to several thousand dollars at 21. Not sure how mature they will be and I think it may actually hurt rather than help.
A few thousand dollars is about 2 weeks worth of a $50K annual salary. A 21 year old should already be prepared to make those financial decisions.

I suggest you do whatever gives the most satisfaction to the gifter.

123
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Re: Grandparents want to give to grandkids

Post by 123 » Tue Oct 17, 2017 12:06 pm

We handled an identical situation by us (the parents) simply opening a separate segregated brokerage account for the grandparent contributions. Because the child was very young we invested it 100% in the Vanguard Total Stock Market. The grandparents contributed $10,000 a year (yes, I know the current limit would be $14,000). We have always treated the funds as intended to be used for the educational advancement and welfare of the grandchild and they were fine with us handling it in this manner. After 16 years of contributions we had to tell the grandparents to stop because the value of the account (including appreciation of Vanguard Total Stock Market) exceeded any anticipated college expenses. After paying out about $120,000 in college expenses over 4 years the value of the account still exceeded $250,000. Of course we have always made it clear to the child that their higher education expenses were covered through the generosity of the grandparents. We have never disclosed the value of the account to the child. We anticipate that there likely will be further education expenses. We would expect that other uses of the funds may be to help fund 401K and (Traditional/Roth) IRA contributions for the child as well as gifts for marriage and mortgage down payments when those times arise, all clearly identified through the generosity of the grandparents who have since passed away. So far we have no plans to directly distribute the balance of the account to the child until such time as the child becomes established in her career. We do anticipate gradually "re-gifting" some of securities on an annual basis to the child for the purpose of diminishing the tax burden of the gains since the child is in a much lower tax bracket then us. Our past practice has been to have about 20% of the account in cash for anticipated expenses.

Along the way we made contributions to a Coverdell ESA for some years when we were within the income limits for those. We did not utilize 529 plans because of the limitations they imposed. Looking back, if we had to do it again, we would do exactly the same thing.

The fact that the grandparents made the gifts for the child did not impact our savings or spending.

LBYM has served the grandparents and us very well.
The closest helping hand is at the end of your own arm.

NotWhoYouThink
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Re: Grandparents want to give to grandkids

Post by NotWhoYouThink » Tue Oct 17, 2017 12:13 pm

barnaclebob wrote:
Tue Oct 17, 2017 11:56 am
I wouldn't worry about it too much. If your kid turns out to be impulsive or irresponsible just don't tell them that they have control of the account until they start doing their own taxes.
I did my own taxes at 16. Back when you went to the library or post office to get the paper forms.

This is a good plan as long as all the grandkids turn out fine, or at least none of the "good cousins" tell the "bad cousins" about the grandparent accounts.

Really, it can work out fine. Most times it probably does. You just have to decide how much risk to take. My kids, of course, are mature responsible adults. But we don't have to branch far out on either side of the family, or either end of our neighborhood, or either set of professional colleagues to see cases where this would have been a problem.

Nate79
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Re: Grandparents want to give to grandkids

Post by Nate79 » Tue Oct 17, 2017 12:23 pm

It depends on what the Grandparents want the money to be used for. Do they want the money to be used for college or do they want the money to be used for toys, games, fun in the near future? In the one case a 529 would be a good choice and the other a savings account would be fine. There is no one right answer here.

delamer
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Re: Grandparents want to give to grandkids

Post by delamer » Tue Oct 17, 2017 12:36 pm

NotWhoYouThink wrote:
Tue Oct 17, 2017 11:37 am
delamer wrote:
Tue Oct 17, 2017 11:31 am
The concern about your kids getting control of the money at 21 is overblown. My kids knew that there was money set aside for their college costs. They did not know that some was in UTMA accounts that they could access themselves. There was no need to volunteer that information, and they never asked.
Well, maybe. I grew up without car seats or, for many years, seatbelts and I turned out ok. Does that mean there is no reason to use car seats or wear seat belts? I'm glad things worked out for your family, but not all families have happy stories to tell. Listen to the stories of kids dying from drug overdoses - no one saw it coming when the kids were in pre-school.
I am talking about maintaining parental control and knowledge of a savings account; people can't access an account that they aren't aware exists. It doesn't have anything to do with the child's level of responsibility.

NotWhoYouThink
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Re: Grandparents want to give to grandkids

Post by NotWhoYouThink » Tue Oct 17, 2017 12:47 pm

I am talking about maintaining parental control and knowledge of a savings account; people can't access an account that they aren't aware exists. It doesn't have anything to do with the child's level of responsibility.
Do the kids do their own taxes? After age 18, they are adults and no one should be hiding their income from them. It's hard to keep the money hidden at that point without breaking the law.


We have never disclosed the value of the account to the child. We anticipate that there likely will be further education expenses. We would expect that other uses of the funds may be to help fund 401K and (Traditional/Roth) IRA contributions for the child as well as gifts for marriage and mortgage down payments when those times arise, all clearly identified through the generosity of the grandparents who have since passed away. So far we have no plans to directly distribute the balance of the account to the child until such time as the child becomes established in her career.
Wow. The "child" is now an adult, and still doesn't know about this money? Let's just say that for some, that level and duration of deception and infantilizing of adult offspring would be a problem. But every family is different.

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dm200
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Re: Grandparents want to give to grandkids

Post by dm200 » Tue Oct 17, 2017 12:53 pm

For small/modest amounts, I would open (with the funds supplied by the grandparent) a membership savings account at a local based credit union in the name of the child - with parent or parents as joint owner. In a few years, even when very young, the child can make deposits and withdrawals (in modest amounts) to and from such accounts. For various reasons, I would not put a large amount in such accounts now - but perhaps in the future for various things. Such accounts are also very handy to use when checks are made payable to the child for birthdays, Christmas, first communion, confirmation, bar/bat mitzvah, and other kinds of milestones children have along the way.

delamer
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Re: Grandparents want to give to grandkids

Post by delamer » Tue Oct 17, 2017 12:59 pm

NotWhoYouThink wrote:
Tue Oct 17, 2017 12:47 pm
I am talking about maintaining parental control and knowledge of a savings account; people can't access an account that they aren't aware exists. It doesn't have anything to do with the child's level of responsibility.
Do the kids do their own taxes? After age 18, they are adults and no one should be hiding their income from them. It's hard to keep the money hidden at that point without breaking the law.


We have never disclosed the value of the account to the child. We anticipate that there likely will be further education expenses. We would expect that other uses of the funds may be to help fund 401K and (Traditional/Roth) IRA contributions for the child as well as gifts for marriage and mortgage down payments when those times arise, all clearly identified through the generosity of the grandparents who have since passed away. So far we have no plans to directly distribute the balance of the account to the child until such time as the child becomes established in her career.
Wow. The "child" is now an adult, and still doesn't know about this money? Let's just say that for some, that level and duration of deception and infantilizing of adult offspring would be a problem. But every family is different.
Breaking the law? We did their taxes with our kids. They knew they had a couple accounts that earned taxable income. If you have some notion that the vast majority of 18-year-olds would dig any deeper than that, then I think you are way overestimating their level of financial sophistication.

Getting back to my original point, I said I thought the fear is overblown. If you don't, then invest accordingly for your kids.

bloom2708
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Re: Grandparents want to give to grandkids

Post by bloom2708 » Tue Oct 17, 2017 1:08 pm

I like the 529 idea. My parents gave each kid some "college" money. I put it in the 529 for each kid.

My sister "invested" it a rental house. Now their oldest is approaching college and they don't have nearly enough money saved. They didn't believe in a 529 or investing in stocks/bonds. They also don't want to sell the rental because it "does so good".

You could ask them to hold the money and when you get an actual college bill, they could pay directly against it. Kind of defeats the purpose of the 529 and tax free earnings. Only you and your parents know the level of trust you each have.
Last edited by bloom2708 on Tue Oct 17, 2017 1:24 pm, edited 1 time in total.
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mxs
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Re: Grandparents want to give to grandkids

Post by mxs » Tue Oct 17, 2017 1:20 pm

NotWhoYouThink wrote:
Tue Oct 17, 2017 12:47 pm
Wow. The "child" is now an adult, and still doesn't know about this money? Let's just say that for some, that level and duration of deception and infantilizing of adult offspring would be a problem. But every family is different.
Did you read that they are talking about over 250k? I personally know that I wouldn't have been ready for that amount of money until I was 25 or older. Everyone is different and in a different situation.

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Re: Grandparents want to give to grandkids

Post by mxs » Tue Oct 17, 2017 1:22 pm

bloom2708 wrote:
Tue Oct 17, 2017 1:08 pm
I like the 529 idea. My parents gave each kid some "college" money. I put it in the 529 for each kid.

My sister "invested" it a rental house. Now their oldest is approaching college and they don't have nearly enough money saved. They didn't believe ina 529 or investing in stocks/bonds. They also don't want to sell the rental because it "does so good".

You could ask them to hold the money and when you get an actual college bill, they could pay directly against it. Kind of defeats the purpose of the 529 and tax free earnings. Only you and your parents know the level of trust you each have.
I like the idea of a 529, in the right situation. It depends on the intent and amount of the gift.

DarthSage
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Re: Grandparents want to give to grandkids

Post by DarthSage » Tue Oct 17, 2017 5:32 pm

As others have said, every family is different. Here is how this worked out in our family:

MIL had two sons. She was adamant from the beginning that anything she had was to be divided 50/50 between the sons (and their families). BIL has 3 kids, we have 4.

MIL set up UTMAS for all 7 grandchildren. They had different amounts put in at different times (ages range from 11-28). In addition, she set up 529s that she controlled. College tuition bills were handed to her, she paid them in full for each grandchild. In addition, she set up a life insurance trust to benefit the grandchildren--our kids share half, BIL's kids share half. The terms of the trust dictate that each grandchild gets 25% of their portion upon college graduation, the balance at age 30. Of course, since it's life insurance, nobody gets anything until MIL passes.

MIL died this past July. There are currently 3 college graduates, 2 in college, and 2 in the pipeline. DH and BIL are in the process of distributing the trust assets appropriately.

As to the trusts, my older two have 6-figure balances. Less for my younger two, but, of course, they're younger. My 22yo has access her fund, a few thousand here or there, for "start up expenses", if you will. She lives 800 miles away from us and is a first-year teacher. The money actually intimidates her--we're helping her to invest it. Similarly, my 20yo has very little interest in it--luckily, though he likes the "set it and forget it" approach to investing. The only thing he spent any of it on was a laptop for school.

My younger two know that they have trusts. We emphasize that the money is legacy from their grandparents, who placed a high value on education and travel. It is not a gift to be squandered.

We hope to fund college costs ourselves, allowing our children a nice start in life with their legacy money. OTOH, I'm also less interested in leaving them a large inheritance when DH and I eventually pass--I'd rather they have it when they're young and can use it for a house down payment, or other expenses. I recognize that this is a minority opinion on Bogleheads. Not one of our 4 kids has looked as the money as a winning lottery ticket, and not one has expressed any interest in blowing it on a Corvette (of course, jury's still out on the younger two).

Just as an interesting note, BIL raided his kids' trusts--not sure where the money went, exactly, but they each got a car for their 16th birthdays, and his oldest developed a serious heroin habit (since kicked, thankfully). I have no idea what he told his kids about the trusts and so forth.

Anyway, I just thought I'd offer another perspective.

itstoomuch
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Re: Grandparents want to give to grandkids

Post by itstoomuch » Tue Oct 17, 2017 5:43 pm

barnaclebob wrote:
Tue Oct 17, 2017 11:56 am
I wouldn't worry about it too much. If your kid turns out to be impulsive or irresponsible just don't tell them that they have control of the account until they start doing their own taxes.
We saddled him the max unsubsidized Stafford student loans.
We also placed UGMA funds into his 529. If he wanted to liquidate, he would assume the taxes due.
Really boils adown who will pay taxes and how much. Pretty simple equation.
Left over UGMA was eventually used to help buy his house.
Ymmv
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Geekling
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Re: Grandparents want to give to grandkids

Post by Geekling » Tue Oct 17, 2017 6:05 pm

I don't want to come across as unappreciative but as someone who "paved" their own way without an inheritance along the way I feel that I have benefited tremendously relative to close friends who squabbled their inheritance and/or did not developer a proper work ethic in the real world. I am convinced their legacy was athe creator of their own undoing. If we are in the fortunate position that our parents would like to leave a legacy, do/should parents have the chance to weigh in? As the "parent" I feel like we should have the opportunity to divert the funds to other more needy causes (cancer research, etc). I do feel like we are raising our kids with strong values and a legacy becomes more of an albatross. Thoughts?

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Re: Grandparents want to give to grandkids

Post by Dottie57 » Tue Oct 17, 2017 7:24 pm

Geekling wrote:
Tue Oct 17, 2017 6:05 pm
I don't want to come across as unappreciative but as someone who "paved" their own way without an inheritance along the way I feel that I have benefited tremendously relative to close friends who squabbled their inheritance and/or did not developer a proper work ethic in the real world. I am convinced their legacy was athe creator of their own undoing. If we are in the fortunate position that our parents would like to leave a legacy, do/should parents have the chance to weigh in? As the "parent" I feel like we should have the opportunity to divert the funds to other more needy causes (cancer research, etc). I do feel like we are raising our kids with strong values and a legacy becomes more of an albatross. Thoughts?
My grandfather gave my brother and me 2k a year during college. Back when the amount would have paid tuition and books at a state university. Since mom and dad actually paid, I stuffed most of my money in the bank. My brother spent all my of his.

Now my story has much smaller amounts involved. But both my brother and I turned out as productive indviduals. Me the saver, he the spender. Both will retire early or on time.

123
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Re: Grandparents want to give to grandkids

Post by 123 » Tue Oct 17, 2017 8:13 pm

Geekling wrote:
Tue Oct 17, 2017 6:05 pm
I don't want to come across as unappreciative but as someone who "paved" their own way without an inheritance along the way I feel that I have benefited tremendously relative to close friends who squabbled their inheritance and/or did not developer a proper work ethic in the real world. I am convinced their legacy was athe creator of their own undoing. If we are in the fortunate position that our parents would like to leave a legacy, do/should parents have the chance to weigh in? As the "parent" I feel like we should have the opportunity to divert the funds to other more needy causes (cancer research, etc). I do feel like we are raising our kids with strong values and a legacy becomes more of an albatross. Thoughts?
+1 The main reason we have not discussed details of our child's "legacy" from her grandparents (my earlier posting above) is the fear that she has not yet demonstrated a lot of work initiative and we feel that full knowledge of the "legacy" would not contribute to developing self-sufficiency at this time.
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delamer
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Re: Grandparents want to give to grandkids

Post by delamer » Tue Oct 17, 2017 9:45 pm

Geekling wrote:
Tue Oct 17, 2017 6:05 pm
I don't want to come across as unappreciative but as someone who "paved" their own way without an inheritance along the way I feel that I have benefited tremendously relative to close friends who squabbled their inheritance and/or did not developer a proper work ethic in the real world. I am convinced their legacy was athe creator of their own undoing. If we are in the fortunate position that our parents would like to leave a legacy, do/should parents have the chance to weigh in? As the "parent" I feel like we should have the opportunity to divert the funds to other more needy causes (cancer research, etc). I do feel like we are raising our kids with strong values and a legacy becomes more of an albatross. Thoughts?
If I am interpreting your question properly --

If you don't want your dependent children to receive financial assistance from their grandparents for college or any other purpose, then you have the right to ask the grandparents not to provide those funds.

You do not have the right to accept the money on your childrens' behalf and then use it for some other purpose, no matter how noble (like cancer research). You have an ethical obligation to use the money in the way the gifter intended.

If you are raising your children with good values, a legacy should not be an albatross. As an earlier poster said, those with good values will understand legacies are a gift to be used for important purchases like houses or education or medical care and are not to be frittered away.
Last edited by delamer on Wed Oct 18, 2017 3:14 pm, edited 1 time in total.

itstoomuch
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Re: Grandparents want to give to grandkids

Post by itstoomuch » Wed Oct 18, 2017 12:00 am

gadoc wrote:
Tue Oct 17, 2017 11:18 am
Hello I have 2 small kids < 3 and my parents would like to gift them some money. What is the best way to do this. i have 529 accounts, they could technically deposit money directly in that. They mentioned opening a custodial account. My only concern is that i'm not sure I would want my kids to have access to several thousand dollars at 21 How much of gift are we talking about?. Not sure how mature they will be and I think it may actually hurt rather than help. Whats the best way to go about this?
Front loading an UGMA from a grandparents' gift of few thousand amounted to 4-6x at age 21 and that included a the tech bubble and 9/11. :greedy
I was a pretty good investor and manager of the UGMA. :mrgreen:
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CollegePrudens
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Re: Grandparents want to give to grandkids

Post by CollegePrudens » Wed Oct 18, 2017 9:01 am

gadoc wrote:
Tue Oct 17, 2017 11:18 am
Hello I have 2 small kids < 3 and my parents would like to gift them some money. What is the best way to do this. i have 529 accounts, they could technically deposit money directly in that. They mentioned opening a custodial account. My only concern is that i'm not sure I would want my kids to have access to several thousand dollars at 21. Not sure how mature they will be and I think it may actually hurt rather than help. Whats the best way to go about this?
There are a few settings to think about:
  • Grandparents want to keep responsibility for the money and its eventual distribution
  • Grandparents want to give the parents the money to parents for a specific purpose (e.g. college education)
  • Grandparents want to give the parents money for "raising kids"
I would clarify the intention and the amounts with the Grandparents and proceed from there.
Live as if you were to die tomorrow; learn as if you were to live forever - Gandhi

BigLaw Survivor
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Re: Grandparents want to give to grandkids

Post by BigLaw Survivor » Thu Oct 19, 2017 9:27 am

This is an interesting thread. I fall on the side of posters who believe that the concern over grandchildren squandering the money is overblown, at least based on my experience.

My in laws started giving the maximum amount allowed under the gift tax law each year to all of their ten grandchildren when most of the kids were in their early teens or younger. I set up brokerage accounts for each of my kids, paid for their college educations out of my own funds (without using the grandparents' gifts), and allowed the money from the grandparents to grow. Years later, a couple of my kids tapped their accounts for worthy causes (graduate school, down payment for a house, etc.). Those without such causes haven't touched the money and it really hasn't occurred to them to.

The reason? We were very upfront with them from the beginning exactly how much money they were getting and exactly where it was coming from, and they knew -- and we reminded them -- that their grandparents weren't born rich and the money was the result of their hard work and frugality over many years. My kids respected their grandparents enough to not just "blow" the money. End of story.

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Re: Grandparents want to give to grandkids

Post by halfnine » Thu Oct 19, 2017 4:32 pm

Geekling wrote:
Tue Oct 17, 2017 6:05 pm
I don't want to come across as unappreciative but as someone who "paved" their own way without an inheritance along the way I feel that I have benefited tremendously relative to close friends who squabbled their inheritance and/or did not developer a proper work ethic in the real world. I am convinced their legacy was athe creator of their own undoing. If we are in the fortunate position that our parents would like to leave a legacy, do/should parents have the chance to weigh in? As the "parent" I feel like we should have the opportunity to divert the funds to other more needy causes (cancer research, etc). I do feel like we are raising our kids with strong values and a legacy becomes more of an albatross. Thoughts?
I used to feel that way as well. However, the longer I've been around the more I realize how much luck plays apart. Or, maybe, more accurately the fact that many risks often don't show up for everyone but can be catastrophic for those for whom it does. Think ongoing medical issues, disability, long term care, longevity, sequence of returns, etc. I would rather leave a legacy where our children and potentially future grandchildren have some cushion against those risks.

NotWhoYouThink
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Re: Grandparents want to give to grandkids

Post by NotWhoYouThink » Thu Oct 19, 2017 4:55 pm

Geekling wrote:
Tue Oct 17, 2017 6:05 pm
I don't want to come across as unappreciative but as someone who "paved" their own way without an inheritance along the way I feel that I have benefited tremendously relative to close friends who squabbled their inheritance and/or did not developer a proper work ethic in the real world. I am convinced their legacy was athe creator of their own undoing. If we are in the fortunate position that our parents would like to leave a legacy, do/should parents have the chance to weigh in? As the "parent" I feel like we should have the opportunity to divert the funds to other more needy causes (cancer research, etc). I do feel like we are raising our kids with strong values and a legacy becomes more of an albatross. Thoughts?
As mentioned above, if you don't want your parents to give money to your kids, either now or in the future, while your parents are alive or after they are dead, you have every right to express your opinion to your parents. And they have every right to ignore you and give money to their grandkids if they want to.

A big part of happiness is realizing you can't control what other people do. You can do your best to raise your kids, but my observation is that the same 2 parents can use the same gene pool to create multiple kids, raise those kids with the same rules in the same environment, and get wildly different adult offspring to show for it. Industrious, lazy, honest, deceptive, all manner of traits can come out in kids for no discernable reason. Maybe one kid would be a lifelong slacker with an early nest egg, and the siblings would become captains of industry. It's exciting to watch, but frustrating if you think you should be controlling it.

RetiredAL
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Re: Grandparents want to give to grandkids

Post by RetiredAL » Thu Oct 19, 2017 7:15 pm

BigLaw Survivor wrote:
Thu Oct 19, 2017 9:27 am
This is an interesting thread. I fall on the side of posters who believe that the concern over grandchildren squandering the money is overblown, at least based on my experience.
BigLaw,

Like you, I too have been bothered by some of the comments on this thread.

I am a parent of three whose grandparents gifted UGMA accounts to each. As part of parenting, I taught them the value of those gift accounts, along with basics the personal finance, of knowing where your money comes from and goes to, and how to save, while they were in still in high school. One used most of the money for College (Masters) and the residual was part of a house down payment. Another left home after 2 years of Junior College in Computer Operations and used his money to fund his wife's Undergraduate School costs - today she's a IP Lawyer and he's a well paid Computer Programmer. Another chose to be a Wildland Fireman, used some of his money for specialized training, and has a pile left over for whenever he buys a house. Yeah, I still help them with financial guidance, but that's part of what parenting it. I know that some point of time, they'll outgrow me and I'll be asking them.

I am now a grandparent, and yes there is a UTMA account. Hopefully I'll live long enough be able to start guiding him, but if I don't, I know his mother will. She is doing well on the road to FIRE. I take pride, that with my DW, we got out kids started out well.

Retired Al

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vinnydabody
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Re: Grandparents want to give to grandkids

Post by vinnydabody » Thu Oct 19, 2017 9:30 pm

Another thing to consider is the UTMA vs 529 debate is what the grandparents want to give. 529s only accept cash. But if grandparents have some appreciated securities they want to give, UTMA is the way to go and with young kids you can harvest some of the built in capital gains on appreciated securities at zero tax cost.

I'm weighing right now whether to transfer some of my son's UTMA funds into a custodial 529. Thing is, I'm not entirely sure he's going to go to college. Too early to tell, so I'm hedging my bets a bit.

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