Author Topic: Would you say no to a financial gift, because you want to be independent?  (Read 13109 times)

lifejoy

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My parents are FIRE'd Hipster Mustachians (as in, they were mustachians before MMM was a thing!).

They want to give me and my DH some money to help pay for a house when we buy one approximately two years from now. Their rationale is that for us young professionals to receive a (partial) inheritance now, would be a game-changer. For us to receive an inheritance in 50 years, it would not make a substantial difference in our lives because we would be 70 and already FIRE'd. I believe there will not be any strings attached to this (perhaps I am naive, but my parents have shown no indication of being like that.)

Obviously it would be a big help for me and DH, but I'm concerned it would deprive us of a "do-it-ourselves" opportunity. It reminds me of the examples in "The Millionaire Next Door" where the parents work really hard to give the kids all the best of everything, and then guess what? By the time the third generation has rolled around, the wealth has disappeared due to a sense of entitlement, "needs", and handouts.

How can I balance my desire to stand on my own two feet, with the reality that this would improve our FIRE date substantially? How can I embody good hardworking values for my future children, if I will have to admit that I received a partial early inheritance? Am I over-analyzing this? (Yes, but critical analysis is fun.)

A note from another thread speaks to this issue:

A few months later another teachable moment arose in a popular teen sitcom where the adult children asked Mom & Dad to lend them money to buy a new home.  Mom & Dad refused.  The kids got angry at the parental parsimony and managed to figure out how to buy their own damn house with their own damn money.  The parents applauded their creativity and said "That's why we wouldn't lend you the money.  We didn't want to deprive you of the experience of figuring out how to do it on your own!"  I've gotten a lot of use out of that sitcom self-reliance simile, and I think our daughter gets it now.  She'll turn 20 next month.

I look forward to hearing your thoughts.

greenmimama

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Well, there is a big difference, from you guys asking for the money, or they just wanting to give you a gift, sounds like they are really proud of you and want to help you out.

If I knew in my heart it was a true early inheritance, I would take it and make it propel me to FIRE that much faster, make them real proud :)

RexualChocolate

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I'd take it from parents. Pride is a waste of time in this instance; if you're going to stay in this house for a long time, you might as well start living in it now.

If you're going to keep flipping homes as you age, then its a luxury purchase theyre financing.

Look into the gift maximums per year (I think per person), it may be more helpful for them to give you 14500 per year per person and not have it be a taxable event. Dunno how IRS would track this but I could seem them being sticklers.

ketchup

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I'd say take it, put it to good use, thank them profusely, and make them a rocking good meal when you have them over after you've moved into the house.

I'm a red panda

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I'd take it as long as there were not strings attached to it and it was truly a gift.

That said, I turn down money from my parents sometimes, so I can understand you wanting to.  Like we have a family party in October. My Mom said she would give us money to "help pay for the flights". I told her we don't need help paying for anything, but I really appreciate the offer.  She'll probably give me $100 or something when we get there; but there are some things I just don't think she should be paying for for us; especially when phrased as "help".

But the $600 or so for the flights isn't a game changer at all.  A down-payment makes a big difference.

How do you balance your "stand on your own two feet"?  Be mustachian in other things. Don't think "I got 45k from my parents, so instead of putting that downpayment myself I can go buy a fun new car."  Invest the difference and be on the path to FIRE sooner.


And I agree with the people who said the big difference is that you didn't ASK for this money, nor do you need it.

nereo

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lifejoy
My sense here is that you have fully 'bought in' to the idea of mustachianism, you are developed as a person, and that you will not suddenly become a materialistic sucka if you accept the money from your parents.  I also understand your parents reasoning that any inheritance (if used wisely) will benefit you far more when you are in your 20s then it would if you were in your 60s.  Typically my worry surrounding such circumstances is that it will change the person - the classic lottery winner going broke 5 years later syndrome.  This doesn't seem to be you, though.

The only thing I can't comment on here is whether there would be any expectations or strings by your parents; only you can answer that.  You seem confident that there would be none.

One thing that you could do is accept the money but place it in its own unique account and vow not to touch it for 5, 10, or even 20 years.  In effect you would be setting up your own trust-fund (albeit the compartmentalization would be one you control).  In the mean time keep up with your current efforts towards FI, including saving more than you make and finding happiness in things that are not things.

arebelspy

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I wouldn't take it, because I don't need or want it.

(And we did do this fairly recently, when my mother-in-law wanted to upgrade our car to a nicer one... we declined.)

Think about what you want, and your values.  If that furthers those, great.  If not, decline.
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Frankies Girl

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Having kind and generous family members is a blessing. If they are offering this as a gift, with no strings attached, and you don't believe they'll hold this against you in the future, then I would accept it in the spirit it is offered.

I get wanting to be independent, but it's different with gifts given out of love. They want to offer this because they care for you and want to make you happy, and you can benefit from it and would appreciate it.

They are offering this also I would think because they are proud of the direction you're heading and the hard work they've seen you put in already, so in a way the gift is also a confirmation of your independence - not a slight on it. Hard work and perseverance deserves rewards but sometimes it is a great distance off before you reap the benefits.

Lucky for you, your parents are the facilitators of this reward now, and it should be even more incentive to work hard and use this as a spring board to get even further ahead in less time. You wouldn't turn down a "move forward 6 spaces" card in a board game, so think of this as a game of life - you just got a lucky draw and it's up to you to put it to good use.

The best way to ensure that any future children are also taught about how to properly think of this is to not squander or otherwise downplay the gravity of the gift given. Put the money to work where it will do the most good, and take good care of the property to ensure it only increases its value. And be thankful to your parents for being so loving and generous.





jms493

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If I knew it was such a small % of my parents world to help us as a gift...I would accept.  I would love to one day help my daughter financially if I felt she deserved it.

CheapskateWife

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I'm with most of the other respondents (sorry Reb's)

Your motivations are truly noble, and likely so are theirs.  Take the gift, grow it until you are ready to use it for a downpayment and then make sure you have a lovely guest room for them to come and visit.

They may be thinking that they would rather dole out their estate on their terms and have the advanced joy in seeing you and your DH blossom. 

I had a similar experience this winter, when my father gifted my husband and I a rather large amount from his bonus.  I felt really uncomfortable taking it (independence and all that) but eventually came around to the idea that he trusted us to do something awesome with it.  So we paid off the last bit of my SL and have rejoiced in the fewer months that we will have to work and FIRE.

I vote for take it!

studentdoc2

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I wouldn't accept it, personally.... Even if there are "no strings attached", I find it hard to believe that something like that wouldn't color a relationship in some fashion. Even if it's not something brought up in a fight in the heat of the moment, maybe it's something that makes you feel as though you are "obligated" to do something in the future with respect to your parents that you wouldn't otherwise. I think I'd rather graciously turn down the gift and figure things out on my own.

Of course, perhaps that says more about my relationship with my/my partner's parents than anything :)

Gone Fishing

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I used to feel a little guilty getting nice non-cash gifts from the in-laws, but now I just say thank you 2-4 times and enjoy it. I probably wouldn't turn down anyone's generosity, unless I knew the giver was in a bad spot, or if I thought I would be expected to return the favor.

A lot of people enjoy giving gifts much more to those who will use them well vs those who will piddle them away.  I have a feeling you are in the good use camp.

I've done a lot of reflecting as I approach ER and while there were a few monetary gifts along the way, there were also several people that gave me career opportunities that without, I could have never gotten where I am today, not to mention public school, family friends, etc.  So the whole idea of "doing it by yourself" (popular with CEO's and Politicians) is a bit of bunk in my mind.  What people should say is, "I worked hard to prepare myself for opportunities, then took advantage of them when they were presented to me no matter where they came from (friends/family etc)" but maybe that is not as impressive as, "I did it all on my own".   

Not directly related, but in the business world, rich people are given nice things ALL THE TIME in the form of marketing, never seen one turn down anything!   
« Last Edit: May 14, 2015, 02:18:36 PM by So Close »

CheapskateWife

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Lifejoy,

You have posted a pic in your journal of the awesome debt-crushing chart you are anihilating through your joint efforts....is it possible that your folks are excited to see you two so focused and want to get a little piece of the action?  Sharing really does feel good.

From a parent's perspective, I just had a conversation with my DH about a large monetary gift for his oldest's college graduation (don't worry, its not life changing but would appoint a dorm room nicely).  It feels really good to know that we CAN do that for him, and even better to know that I don't feel like I have to manage what he does with it.  If you have that kind of dynamic with your parents, accepting the gift should be fine.

AJ

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I used to say I wouldn't want to win the lottery because I've worked so hard and come so close to FI on my own that I don't want my story to be forever tainted with, "Well, she did it because she won the lottery." But then I realized that was just pride, and somehow I had fallen victim to caring what others think about me. Not that I've won the lottery (or played, for that matter) but it was an enlightening thought exercise.

If the money will help you move toward your goal, I think you should take it. Your parents didn't have to offer it, so it sounds like it would make them happy to be able to help you.

I wouldn't accept it, personally.... Even if there are "no strings attached", I find it hard to believe that something like that wouldn't color a relationship in some fashion.

In any other relationship dynamic I would agree - but I think it is human nature to want to provide for our children. It is very possible that they just get intrinsic value out of gifting money to their offspring. If any relationship is capable of giving without strings it is this one (and maybe also grandparents).

pachnik

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I received a financial gift from my parents once when they sold their old house.   No strings attached.  I used it for a down payment on a condominium.  Now, I do wonder sometimes if they would have said anything if I'd bought a new Mercedes with it.  But I am sure they weren't very concerned about that.  :)

I say accept it.  It is their gift to give and they want to give it to you and your husband. 

Gone Fishing

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I used to say I wouldn't want to win the lottery because I've worked so hard and come so close to FI on my own that I don't want my story to be forever tainted with, "Well, she did it because she won the lottery." But then I realized that was just pride, and somehow I had fallen victim to caring what others think about me. Not that I've won the lottery (or played, for that matter) but it was an enlightening thought exercise.

I've had similar thoughts about what people would think if a parent or grandparent passed away shortly before my ER.  Your right in that it doesn't matter.  Plus anyone that really knows me, knows that I have always saved a lot on my own.
 

Gone Fishing

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It reminds me of the examples in "The Millionaire Next Door" where the parents work really hard to give the kids all the best of everything, and then guess what? By the time the third generation has rolled around, the wealth has disappeared due to a sense of entitlement, "needs", and handouts.

Big difference between giving a kid the best of everything with little or no expectations and giving them something AFTER they have shown their ability to manage it well.

swick

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My grandparents did this for my parents. They knew they had enough to live comfortably for the rest of their lives and wanted to see the money being put to good use. There were 4 boys, each got the same amount. One bought a boat, one went traveling and the other's wife spent it all.

My parents took the money and put it towards the down payment on a cheap house in a new city. They were renting in a HUGELY expensive city, my dad had every second Sunday off and was working 3 jobs. They paid off their credit cards with their tax returns.They were at a breaking point and headed for divorce.

We moved, built a new happy frugal life, and my parents were able to raise their kids in a safe small town. More money was distributed as more assests were soldoff, each time my parents used it towards building their nest egg.

My Mom's parents have been doing the same except giving money to the kids as they need it. They have been keeping records to make sure everything is fair - although the shit is going to hit fan with a couple of the sibs who feel entitled to everything.

Now, they are looking at doing the same for us. There is only two of us and we are a tight family. They have given my sister money for the down payment on her house, and recently gave her my mom's old car when she upgraded to a newer used car.  She is single, I have a husband with a great income. I'm not worried about it one way or the other- but it has made a HUGE difference to my sister. and got her into a much better and more secure financial place.

TL:DR Your responsible, you have made awesome progress. You know your parents, if it is no strings attached then take it and allowit to help you with your goals. Parents want financial security and safty for their kids - be responsible and use it wisely.


Paul der Krake

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Do your parents have a history of manipulative behavior? Sometimes, past performance is indicative of future results.

I also wouldn't accept gifts from people who are in a worse situation than me, like old relatives who insists on sending a check to all their grand children on their birthdays, because that's what they've always done, when their house needs a new roof. Fortunately this has not happened yet, because there is no easy way to handle it, you can easily hurt their feelings by refusing.

But aside from that, I believe in graciously accepting gifts and not making a big deal out of it.

madamwitty

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DH and I accepted such a gift / "advance inheritance" 7 years ago when we were getting ready to buy a house. Mom & Dad each gave us the max annual gift exclusion amount ($12k) and did the same for both brothers. The brothers in turned "gifted" me their money and if have just recently "gifted" it back. They lost out on market gains, but that was their gift to me I guess. They are both in even better financial shape than me and DH.

Our family doesn't do "drama" so there were/are no feelings of obligation or unfairness, just family members helping each other out. It has helped our FIRE date but not so much that I feel we "owe it all" to Mom and Dad. The more substantial effect came from the fact that DH and I both came out of college debt free thanks to our parents. We plan to pay it forward to our kids (only fair since we will not give the kids an option to NOT go to college.) This saving for kids' college in turn *pushes back* our FIRE date. I guess it all comes out in the wash since we accepted gifts& good fortune but plan to pay it forward. Maybe planning to "pay it forward" somehow, either to kids or a charitable cause, can help you feel good about accepting a gift. Just a thought.

4alpacas

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I would say no.  I don't need the money nor do I want the money.  I want my parents to be able to spend all of their money on whatever they want or need. 

dsmexpat

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Take it. Don't squander it. Pay it forwards to your kids, plus whatever gains it made.

TN_Steve

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Depends.

Are you sure that your folks are set with good margins?  As others noted, any sibling issues?  If it passes these two tests, and no strings, I'd gratefully accept it.

In our situation, we've accepted monetary gifts that DW's folks give to all of their children each year (about 5K or so?).  We also have given gifts of several thousand to each of our 20-something kids on a couple of occasions when we knew that it would be a big assist to one or another of them.

BUT, I would vigorously attempt to dissuade my mom from giving us even a small monetary gift; in fact, I've tried to talk her out of even giving us basic holiday gifts at Christmas.  At least from our perspective, she is not in a position to give stuff away, especially to us.  OTOH, if she were to insist upon a small check as a gift, I'd have to consider the hurt feelings of a rejection ....

This is a big area of family dynamics, where YMMV applies in full.  :-)

lifejoy

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I really appreciate all of the thoughts and advice that was posted here. It really helped me to see the big picture, and address potential concerns. Some notes:

-No siblings, no problems there.

-Past behaviour is indicative of future behaviour: they paid for my first degree, no problems there. They gave me money for a car, if I wanted one - and I didn't, and they were totally fine with that money going to my second degree instead. Talk about no strings attached. So that's good.

I think I struggle against growing up in such a privileged situation. My parents both had very humble beginnings, and I think it's a point of pride for them (as it should be) that they've come such a far way. They want my life to be easier than theirs. Makes sense. But the key word that kept coming up was pride. Am I going to let pride stand in the way of FIRE? Silly.

I'm feeling a lot more comfortable with this. It won't happen for a couple years, but I wanted to straighten out my thoughts on the matter. For me, it really hinges on the fact that my parents are extremely careful with their money and they would not offer anything they could not afford. My DH's parents on the other hand, gave us a large sum for our wedding - but we never cashed the cheque, because we were worried about their finances.

Hoo boy. It'll be interesting when I'm raising my own kids, and trying to keep them from being spoiled and entitled! Wish me luck ;)

iris lily

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ah OP, you are great! I suspect that one of the reasons your parents want to give you money is that they know you don't need it and will treat their gift respectfully.

I am old, but I had parents who gave us bits of money here and there, no strings, it can certainly be done.

I also keep track of how much those gifts and inheritances make up of our net worth, and it's less than 5%. No one can say we didn't do this on our own.

RunHappy

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If it is a true gift with no strings attached then I would do it.

Sometimes the best gift you can give to someone is letting them do something nice for you.

GuitarStv

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Would you feel uncomfortable having your parents babysit when you have a child?  Would you feel uncomfortable having your dad come over and do renovations to a place you're living, or to fix your car if it broke down?  Giving money is no different really.  All parents tend to want to help their kids out as much as possible, there are just different ways of approaching this.

Bicycle_B

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OP, I like your question and your thoughts on it so far.  Here are a couple more things to consider.

Re accepting the gift:  If it changes the number of financially independent couples in the family (for example, from one to two), the family as a whole has more freedom.  Based on your description, accepting the gift will make this happen sooner.

Also, once you are at FI, you can "pay it forward" where and when appropriate.  One option would be to accept the gift, continue working if you like, keep an accounting to clarify when you "independently" become financially independent, and once you have "made it yourself", the gift money becomes a gift fund that you can use at will for others (children, friends, people in need...there is plenty of legitimate need in the world...).

Another is simply to FIRE earlier, ackowledge the delight, and let your parents know how much you do enjoy the extra freedom.  That may be very "worthwhile" to them, for them to know that even with how responsible you are, their gift gave you joy.

Re turning it down:  There is a difference between "We did it ourselves" and "we could have done it ourselves".  You have to decide whether that is worthwhile.  IMHO, it is hard to anticipate when this will be valuable, so if in doubt, keep this option.  Once you abandon it by accepting the gift, it's hard to get back. 

In this case, you could discuss with your parents where else the gift might go.  Could you jointly find another worthy recipient?  Would discussing this be fruitful in bonding for the family and causing everyone's sense of value to continue maturing?

Congratulations on such a wise process, and good luck whatever you decide.

Chester Allen Arthur

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If someone offers you free money, take it.  It seems that it's a genuine gift, made in good faith, with no strings attached.  Take the money, put it towards the house down payment, and accelerate your FI.  Once you've retired you can pay your parents back by visiting more often.

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I wouldn't take it, no. But I think you should :-) everyone's already said it all better than I can, but from what you've said, they're in fantastic financial shape (well and truly FI) and it won't change your frugality.

For me, pride and independence are fairly central to who I am. So I wouldn't take it. But I think being able to gracefully accept a loving gift is a beautiful thing, and if you can do it, that reflects well on who YOU are - someone with an open heart, not letting ego prevent your parents from getting to enjoy helping you.

Cressida

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How can I balance my desire to stand on my own two feet, with the reality that this would improve our FIRE date substantially? How can I embody good hardworking values for my future children, if I will have to admit that I received a partial early inheritance? Am I over-analyzing this?

No, you are not over-analyzing.

I personally, myself, would not take the money. It's *very* important to me to be absolutely not beholden to anyone. And if I'd taken a large monetary gift, I would always feel like a phony whenever I told anyone that I was financially independent. (I'm not FI - this is a hypothetical.) Again, that's speaking purely for myself.

A lot of the advice here is along the lines of "take the money and run," and I get that and I absolutely don't think you would be wrong to do it. We can't control who our parents are and whether or not they have means. If your parents are wealthy, they're going to leave you money one way or another, and that doesn't mean you lack independence - it's just chance.

But in the quoted paragraph, you did raise perfectly valid concerns. They might not be ruthlessly hard-headed and practical, but if they speak to you, then they're worth listening to.

ethereality

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Perhaps you could take the money and use that for a downpayment, but invest some of your own money in a charity that means something to either your parents or you. Just a thought.

Kaminoge

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I wouldn't accept it, personally.... Even if there are "no strings attached", I find it hard to believe that something like that wouldn't color a relationship in some fashion.

I find this sad.

My parents fairly regularly give me things - despite the fact that financially I'm probably better off than them. For example I'm going to visit this summer. They're paying for me to hire a car (even though I am perfectly able to pay the car hire myself) for the month. I always assure them I don't need them to pay. And they always assure me that it makes them happy to give their children things (I have a brother, I'm sure they give him stuff too although we're not the type to keep score). They'd much rather give me stuff now and see me enjoy it rather than have a little extra to leave me when they die.

Why should I take that pleasure away from them? They've lived Mustachian lives, they have more than enough (to live the very humble lifestyle they choose to live) and I'm not concerned that they're depriving themselves in order to do this. Obviously this is much smaller amounts of money than what you're talking but I think the idea is the same. If they can afford it and it will make them happy to give you this then why not accept the gift?

Kaminoge

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Oh and for me the idea of independence has nothing to do with it.

I have got where I am today because they gave me so many advantages... from the color of my skin, the country I was born in, to the fact that I was read to constantly as a small child and had an upbringing where education was valued. Even a substantial financial gift would in no way be equal in value to all of those things spread over the course of my life. I don't exist independent of my family/culture/upbringing so to worry about needing to somehow prove myself "independent" just doesn't make sense.

REAL WORLD EXPAT

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I've just had a similar experience myself and is did not take the offer. Parents had an insurance policy mature and wanted to split it between myself and my brother, it amounted to about $12,000 each. My reasons for not taking it:

My wife and is are far better off than my parents and we have no financial needs and a regular substantial income inflow, they are in their 70's and though comfortable by no means wealthy.
From previous behavior I believe the gift would have been bought up to my inlaws (not realizing it would sound  like this) in a 'look what we did for them' type of thing. I did not want that to happen.
My parents need help around the house yet refuse to get it, yet complain about how tired they are keeping up the house yet refuse to get help or move, in refusing the money I told them to use it to get help being as in can't come over and help them given the distance between us.

Happy with my decision.

If I were you l'd not take the money, but if you do then good luck to you!

For the record my brother took his half and bought a new kitchen with it.
« Last Edit: May 16, 2015, 05:35:15 AM by RW-Expat »

kpd905

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Look into the gift maximums per year (I think per person), it may be more helpful for them to give you 14500 per year per person and not have it be a taxable event. Dunno how IRS would track this but I could seem them being sticklers.

The gift tax will not kick in until the parents have exceeded their lifetime exclusion, which is around $5.2 million.

former player

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One point of view I haven't seen in the replies is: what is the alternative to accepting this gift now?  You are your parents' only child, and it seems as though they are well set financially.  That probably means that if you don't take the money now, it will come to you through inheritance when they die.

I've received money through inheritance from family members I loved.  Frankly, there is a considerable amount of suckage attached to that sort of inheritance, as I would far rather have those people I loved still in my life.  It taints the money for quite a while.

It has been something of a comfort, given a bit of distance, that I've been able to do things with the money that I know they would have approved of and enjoyed seeing (and that other family members have approved of and enjoyed seeing).  It's still sad that they are not here to see it, and I'm sure they would have got a lot of pleasure from it if I had been able to do it during their lifetimes.

Sometimes life is short, you know?  And it always ends, sooner or later.  If it is in you to take utility and pleasure from this gift from your parents during their lifetimes, and to see them get pleasure from it, please don't let an internet concept of "mustachianism" get in the way of that.  I'm fairly sure that both you and your husband have grown up to be the sort of people who will not suddenly become spoilt useless parasites on the world by accepting this money.

Whether or not your putative children will be the same mature responsible, hard-working people that you and your husband are is an entirely separate question.  I doubt very much that your accepting a gift from your parents now will be the determining factor of what your children will be like in 20 or 30 years.

I hope you will be at peace with whatever you decide.


aschmidt2930

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I think you're over-analyzing. I say accept the gift, and pay the favor forward down the road, whether that's your children or somebody else entirely.

swick

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it popped into my head while I was doing dishes....do you happen to get your love of giving gifts from your parents? I know you have touched on it before, and several others have mentioned it. It might make them genuinely happy to help you out.

My parents usually give us a bit of money on our Christmas and Birthdays. My mom and I were talking about it because Mr. Swick's family is big into the "gifts" and it is always a bit of a struggle because my parents started giving us cash at a young age because they thought we knew what we wanted the best and they were curious to see what we would do with the money. So trying to find "the perfect gift" for people that we love but don't have much in common with is really stressful. because we don't value stuff as much, whenever we think we have found the perfect thing - we are often wrong. It sucks.

 My mom said " We love giving you a bit of money and seeing how you invest in yourself!" For that money I have always done some sort of training course or class or educational opportunity that adds a ton to my life, but I could never justify spending on myself.  It usually pays them dividends in one form or another as well because I share with them what I learn. Perhaps your parents just see you as a really safe investment :)

Psychstache

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Quote from: Marsellus Wallace
you may feel a slight sting. That's pride fucking with you. Fuck pride. Pride only hurts, it never helps.


Take the gift.

Bracken_Joy

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See, I think it depends on the family. If I accepted a gift to help with a down-payment (my parents or my in-laws, either way), that would be code for "we get a permanent room, get to stay whenever we want, drop by without warning, and get to move in with you when we decide when we get older". They would also then be much pushier in their opinions on where and what type of house we buy (ie, much larger than we want). So for myself, I would say no. But I don't have a "no strings attached" sort of situation. Family dynamics vary greatly.

La Bibliotecaria Feroz

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This sounds like a pretty sensible financial move on both your part and your parents. But don't forget to talk to your husband about it! He's going to be living off their largess, too :-).

I accept smaller cash gifts (in the $500 range) and plane tickets from my parents. But when I let them pay for plane tickets, I always feel more obligated to be a particularly good guest.

kathrynd

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How money are we talking about.
Enough to buy a house, or a down payment?

Maybe a compromise?
Consider  having your parents provide a mortgage for you, maybe at a little lower interest rate than you can borrow at another lender.
Your lawyer can easily prepare these papers.

This way, if circumstances change for your parents, and they need the money, you can just  refinance with a conventional lender, and pay your parents back.

RetiredAt63

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There is no tax on cash gifts in Canada - I just checked.  No limits either.  There are attribution rules for non-cash gifts like stocks.

It is very individual.  But I have been in your situation, received a cash gift from a  parent, and it had no strings attached.  Truly, no strings. I think whether the whole things works or not depends on the people involved.  You are not about to turn into a person hoping/asking for more money from your family.

However, if they are looking at it to be used for a house, as opposed to an open gift (you use it for whatever you want) then it may need more thought.  Would you feel pressured into buying a house sooner because you have the down payment, even though you may not be ready for a house at this point?  In that case, maybe you could suggest they wait until you are ready to purchase.

Look into the gift maximums per year (I think per person), it may be more helpful for them to give you 14500 per year per person and not have it be a taxable event. Dunno how IRS would track this but I could seem them being sticklers.

cats

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I wouldn't take it, because I don't need or want it.

(And we did do this fairly recently, when my mother-in-law wanted to upgrade our car to a nicer one... we declined.)

Think about what you want, and your values.  If that furthers those, great.  If not, decline.

I totally agree. 

I love my parents dearly and I have accepted financial help from them in the past (college, for example), but I'm increasingly inclined to say "no" when they want to "help out".  Part of it is definitely that their vision of a "good" lifestyle is definitely not completely aligned with ours though.  In the sense that they think we are scrimping too much and should instead be spending money more freely on things like plastic kitchen gadgets.  They offered to help pay for our wedding last year and I turned them down and am REALLY happy I did so...even without paying for it, they were far too pushy in offering advice about what we "should" do or what the "right" thing to do was.  If they had been footing any part of the bill I'm sure I would have wound up with stuff (or guests) I did not want (and I'm sure we would have paid more than we did doing things on our own and having only exactly what we wanted).  I guess in my case, I feel my parents are incapable of making a gift that truly has no strings attached, even if the "string" is just that they feel entitled to stick their noses in more.  In the case of a house, I could see them offering to help out and then pushing us to get something bigger/more expensive/with amenities we don't really care about--meaning that their gift would not actually help us at all.  My dad already pulled this on me once with a car.  I didn't really need one, but he thought I did, so insisted on selling me his used car.  He did give me a really great price, but the fact still remains that I did not need it, and if I had never had it that would probably have been $5-10k in repairs, gas, etc. that I could have skipped, not to mention all the nagging and "advice" on how to maintain my car, and the lost fitness opportunities from driving instead of biking or walking.  When my car was finally totaled in an accident it really just felt like such a relief not to have to deal with all of that again.  Not really interested in repeating that experience on a larger scale with a house.

If your parents really are willing to just cut a check and then stay completely disengaged, I'd consider taking the gift.  If not, I'd probably try to take a pass on it.  I guess also...how much of a gift are they considering and is it really a game changer? I know for us, houses in our area are so expensive (and we plow so much money into savings each year) that a gift of $10-20k would not really make much of a difference in our ability to buy, so that would make me extra reluctant to take it, because the benefit would really not be outweighing the cost.
« Last Edit: May 16, 2015, 07:24:46 PM by cats »

REAL WORLD EXPAT

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I guess in my case, I feel my parents are incapable of making a gift that truly has no strings attached, even if the "string" is just that they feel entitled to stick their noses in more. [/quote]

This!

Nords

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My parents are FIRE'd Hipster Mustachians (as in, they were mustachians before MMM was a thing!).

They want to give me and my DH some money to help pay for a house when we buy one approximately two years from now. Their rationale is that for us young professionals to receive a (partial) inheritance now, would be a game-changer. For us to receive an inheritance in 50 years, it would not make a substantial difference in our lives because we would be 70 and already FIRE'd. I believe there will not be any strings attached to this (perhaps I am naive, but my parents have shown no indication of being like that.)

Obviously it would be a big help for me and DH, but I'm concerned it would deprive us of a "do-it-ourselves" opportunity. It reminds me of the examples in "The Millionaire Next Door" where the parents work really hard to give the kids all the best of everything, and then guess what? By the time the third generation has rolled around, the wealth has disappeared due to a sense of entitlement, "needs", and handouts.

How can I balance my desire to stand on my own two feet, with the reality that this would improve our FIRE date substantially? How can I embody good hardworking values for my future children, if I will have to admit that I received a partial early inheritance? Am I over-analyzing this? (Yes, but critical analysis is fun.)

A note from another thread speaks to this issue:

A few months later another teachable moment arose in a popular teen sitcom where the adult children asked Mom & Dad to lend them money to buy a new home.  Mom & Dad refused.  The kids got angry at the parental parsimony and managed to figure out how to buy their own damn house with their own damn money.  The parents applauded their creativity and said "That's why we wouldn't lend you the money.  We didn't want to deprive you of the experience of figuring out how to do it on your own!"  I've gotten a lot of use out of that sitcom self-reliance simile, and I think our daughter gets it now.  She'll turn 20 next month.

I look forward to hearing your thoughts.

I really appreciate all of the thoughts and advice that was posted here. It really helped me to see the big picture, and address potential concerns. Some notes:

-No siblings, no problems there.

-Past behaviour is indicative of future behaviour: they paid for my first degree, no problems there. They gave me money for a car, if I wanted one - and I didn't, and they were totally fine with that money going to my second degree instead. Talk about no strings attached. So that's good.

I think I struggle against growing up in such a privileged situation. My parents both had very humble beginnings, and I think it's a point of pride for them (as it should be) that they've come such a far way. They want my life to be easier than theirs. Makes sense. But the key word that kept coming up was pride. Am I going to let pride stand in the way of FIRE? Silly.

I'm feeling a lot more comfortable with this. It won't happen for a couple years, but I wanted to straighten out my thoughts on the matter. For me, it really hinges on the fact that my parents are extremely careful with their money and they would not offer anything they could not afford. My DH's parents on the other hand, gave us a large sum for our wedding - but we never cashed the cheque, because we were worried about their finances.

Hoo boy. It'll be interesting when I'm raising my own kids, and trying to keep them from being spoiled and entitled! Wish me luck ;)
In these situations you have to know your kids, and you have to know your parents.  My impression is that parents who are extremely good at earning high incomes are not so good at passing the skill on to their kids (let alone their grandkids).  The high earners are spending all of their time building their income, not building financial skills in their kids.  If those offspring have learned anything, it's that money falls from the heavens like rain. 

However parents who are extremely good at saving a high percentage of their income are quite successful at teaching their kids the same skills.  The kids won't always follow that lifestyle, but they know how to do it when necessary.  When they're motivated to FIRE then that high savings rate becomes their way of life.

When I wrote that 2012 comment you've quoted, out daughter was a college junior.  She had just moved off-campus and was figuring out her finances.  We decided to help by giving her the type of financial incentives that we'd given her in high school, only an order of magnitude higher.  Instead of paying room & board directly to her university, we parents paid the money to her in semester installments (but now she had to stretch it to 12 months instead of nine).  We told her that she could keep whatever she didn't spend-- and suddenly all of her frugal upbringing snapped back into place.  She brought in two roommates, cooked almost all of her meals, and became a hardcore bicycle commuter.   We could tell that she had the skills to do it on her own.

When she graduated last year, the Navy paid her a $15K bonus to volunteer for advanced training.  She immediately put that into her retirement accounts and saved even more in her taxable accounts.  She could have blown it on a 2014 Mustang GT (like at least one classmate), but she's lived with FIREd parents for over half of her life.  She's keenly focused on reaching her own FIRE.

As parents, my spouse and I feel that we have "enough".  We each have our own military pensions (mine now, hers starting in 2022) and our 13 years of retirement experience indicates that we're not gonna run out of money.  Our daughter seems to be doing a fine job on her own FIRE, but we all know that in a few years the Navy will offer her even more bonus money for an active-duty contract of 3-5 years.  If she's having fun, then great-- the $65K/year would greatly accelerate her FIRE for Navy duty that she'd want to do anyway.  But if she wasn't having so much fun after serving her commitment, then we didn't want her to be tempted to sacrifice her lifestyle for a dumpster of "blood money" (like some of her shipmates). 

We decided that it made sense to accustom our daughter to having large sums of human capital dumped on her head.  At graduation last year, we gifted her some of her (unspent) college fund.  It's enough for her to maximize her TSP and IRA contributions, with a little left over for taxable investment accounts or a small lifestyle party.  (Not that she has much time to party.)  We've told her that this is a once-in-a-lifetime opportunity for us to transfer the inheritance now, when she can compound it for decades almost tax-free.  We've also told her that this "profit sharing" of her unspent college fund is her chance to learn how to handle spending a lump sum over the next 12 months, and hopefully it'll immunize her when the Navy starts waving those big bonus contracts at her a few years from now.

We've done the same profit-sharing gifting again this year.  So far so good.  She's extraordinarily frugal and she's saving well over half of her own income, let alone the profit-sharing.  Of course she's also working 60-hour weeks and has very little free time, but she's shown no inclination to feel entitled to splurge.

I tell her that I worry about affluenza.  We still use that sitcom analogy with her when we talk about how we hope we haven't squished her initiative.  If she went out and bought a Tesla then we might feel as if we've done enough profit sharing, but right now we're comfortable with continuing the gifting.  She seems to treat it as a stewardship opportunity instead of raining money.

Your parents probably feel the same way about you.  They can see that they have enough, and they can also see that you have a handle on your FIRE plans.  They don't want you to feel forced to squeeze your finances to buy a home, and they want to share their wealth now rather than making you wait five or six decades.  Your parents can see that you've already acquired the skills which those sitcom young adults lacked, and they see no reason to make you continue to prove your proficiency.  In fact they probably feel like Dolly Levi in "Hello Dolly"-- they want to spread around their wealth a little and make things grow.

You've already shown that you know how to do it yourself, and you have no sense of entitlement.  You've earned the privilege of letting your parents spoil you a little, so why not enjoy it?  You can add their gift to your down payment or you can bank it in CDs for "financial insurance" if you get laid off between mortgage payments. 

Perhaps your parents will feel more comfortable about visiting you in your new home without worrying that they're imposing a burden.

Instead of feeling like you're skirting the FIRE "rules", treat this as your stewardship opportunity.  Show your parents that you're using their gift judiciously.  Let them enjoy the vicarious thrill of your accomplishment while you take comfort in knowing that it won't turn you into a spendthrift. 

A few years later, if you still feel embarrassed by the largesse, then you could suggest that you all team up to endow a scholarship fund.  Simply endowing $25,000 on a university lets them offer a $1250/year scholarship in your name(s) on their students, allocated by whatever degree or other qualifications you put on it. 

I wouldn't take it, because I don't need or want it.

(And we did do this fairly recently, when my mother-in-law wanted to upgrade our car to a nicer one... we declined.)

Think about what you want, and your values.  If that furthers those, great.  If not, decline.
I guess in my case, I feel my parents are incapable of making a gift that truly has no strings attached, even if the "string" is just that they feel entitled to stick their noses in more. 
Ah, the "know your parents" part. 

In this case you've described my spouse's parents, with whom we no longer discuss anything financial.  In fact for the last eight years we've hardly discussed anything at all.
« Last Edit: May 16, 2015, 03:03:27 PM by Nords »

pachnik

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+++1 to above poster.

I liked reading this from the point of view of a parent of a young adult.  Really good common sense that we expect from Nords.  Good to be reminded of the concept of stewardship too. 

When my parents gave me part of the proceeds of the sale of their home, it was a game changer for me. I was able to put a down payment on a condo.  (I live in a very HCOLA.) Though I sold the condo after 7 or 8 years, I took the money and invested it. 

andreamac

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Just another thing to think about, depending on where you live, your husband if you get divorced would own half of the house since your married/common-in-law.

Here in Ontario Canada, I actually know of someone in this scenario. My friend's parents paid for their house in full and now they are getting divorced. The house rules for here say that it's split 50/50 no matter what so now she has to move and pay him half the house.

It might be worth looking into the laws in your area.

Here they mention if you get an inheritance and pay off your house with it, your other half will get half. If not, you can keep it separate.

zinnie

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Definitely take it!

The loss of pride and being able to say I made it to FI all by myself has been on my mind, too. I always track the "gift" money so I can calculate how much it really helped me out and make sure I could have been FI all on my own, too. A pride thing for sure, and I agree with other posters about finding ways you can pay it forward in the future.

It has been mentioned already but make sure you look into gift taxes. In my family any gift is always given out at the max untaxable gift amount per year instead of all at once...