Author Topic: Passing money to kids  (Read 1501 times)


  • Stubble
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    • This Frugal Father
Passing money to kids
« on: October 18, 2017, 01:10:09 PM »
I've still got some work years left, maybe 20 depending on how much I'm enjoying my job.  My current plan is to hopefully retire my DW in 10 years when our oldest is in college, but she is a busy body so could potentially keep working.  We are both maxing out 401k/TSP, Roth IRAs and investing about $600/month in post tax.  If we keep up at this rate for the next 10-20 years we should have a decent amount.  I see us spending some money in retirement but nothing super crazy outside of our normal budget.  We have 3 boys and if we end up with a lot of money in retirement we don't necessarily want them to know as we try to teach them about money and how to save and about working hard, and the last thing I want to do is minimize this by them thinking that they will not have to work hard because their parents will leave them money.  Raising kids is difficult financially, so I would like to help when they have kids in ways like contributing to 529 plans or supplement retirement plans or smaller things like that, but I am curious if anyone has ways to pass along money tax free while still being able to use it if needed.

So for example, if the annual gift of $14k can be given to each child (3 kids) by both parents, you could potentially give up to $84k/year, right?  I don't want to give all my money away, especially if we needed it for high health care costs as we get older, but can we give a $14k/year gift for each kid that then goes into a Vanguard/Fidelity investment account (or even a savings account) that we could still use during our years?  I don't want to over-give and  have to take  money back or  under-give and have them have a large tax liability, so I'm trying to research how to give while still maintaining access but allowing them tax free money if it does transfer over to them, without having to worry about an issue if one of the boys is not smart with his money.  Basically I don't want them to have access to it (some of it anyways) until we're not around so they don't turn into trust fund kids and will continue working hard.  The kids are 8, 6, 4 so still tons of time, but I like to try and project and am wondering if anyone else has done the same?

I believe my mother had a joint checking account with my grandmother, and she had about $100k in it that was passed on to her, and she didn't have to pay taxes on it since it was in her name, but that puts a lot of trust in your children to do the right thing and I imagine plenty of parents have been taken by a child with money problems. 

Has anyone thought about how to pass things on?  I'm sure there are better ways, I just haven't done a ton of research on it and wondering if there are any articles or ideas on how to best pass on money that has already been taxed without having your heirs have to get taxed on it as well.