As much as you might want to help your children by giving them money they can use, it may be best to hold off and seek advice to make sure that you are doing so in the best way.
Most parents like doing nothing more than helping their children when they can and when the children deserve the help. Parents often understand that when their children are getting their careers and lives started, they might need some financial assistance to help them along the way.
Giving children a little money now, might go a long way to helping the child make a lot more money later. However, many parents are so eager to give to their children that they do not think through the best ways to make the gifts.
There are bad ways to give to children, as Kiplinger points out in “5 Ways NOT to Gift to Children … and 5 Better Ideas.”
The most important thing to understand is how giving a child something might affect them and you in the future. For example, if you give a child a large sum of money outright and the child gets divorced, it is possible that your child’s spouse and not your child could get part of the money in a divorce settlement.
Another common problem people run into, is naming a child as the joint owner of a piece of property. That can lead to big problems later, if the child has financial problems as creditors can go after the property.
The best thing to do is to be careful and talk to experts before giving money to a child.
Accountants and estate planning attorneys should be consulted to make sure that the tax and estate implications have all been thought through.
Reference: Kiplinger (January 2017) “5 Ways NOT to Gift to Children … and 5 Better Ideas.”
