Offering financial aid to children now or later is the major premise of this debate. Acceptance of that assistance will no doubt have varying degrees of response and determination by the children. That determination can drastically alter their lives and early offering by caring and thoughtful parents will usually have been weighed carefully with need and urgency considered. Knowledge of each child is balanced against potential repercussions as timing of that financial aid to children has many benefits on either side of the coin. That determination in some instances will totally be a coin flip.
Financial planners at all levels dig in, do all of the numbers with all financial information of the day, add calculated guesstimates, for the children and their parents. The planners investigate all the tax consequences. Looking at tax brackets and governmental penalties with annual gift taxes currently at $13,000 or so per child per year with lifetime somewhere north of $300,000. These limits may move with changes in any administration in Federal, State and Local taxing bodies when their tax law writers will amend: credits, rebates, payback, forgiveness and grandfathering. Nobody knows for sure and can only predict what tomorrow will bring on a taxation basis.
Other than gifts of money, other assets are evaluated at estate date, purchase dates, estimated values. These too will with all likelihood be modified by tax law. Assets and evaluation can be compromised over time. Look at what has just transpired with the real estate and stock markets in the past months and years, tumultuous. Planners and economists were in part responsible for the debacle which destroyed, damaged, and in some cases wiped out entire estates, retirement dollars, with the consequence of devaluation to plans in general.
Examples, presented above, are compelling reasons to offer this side of the argument a staggeringly large push to come down on the side of giving “Now”. The unknown value of the future promotes present day action. Another argument for the “Now” side is a vast majority of people are not in the category where the maximum(s) will ever be met dispersed over an average size family.
Theories of financial planners usually center around the tax liabilities, possible limits regarding: Social Security, and Medicare and Look-Backs of sizable gifting or transfer of assets for prior years. Again that may be the ruling today and more pertinent the health and mental status of the elderly which can change in the blink of an eye.
The financial consequences and expenses not regularly entered into the equation are costs incurred by the children in interest expense they will be paying on a home mortgage, auto or school loans at payout rates of five percent or more while income on the un-gifted dollars at today’s rates could be less than one percent return. Or in some instances showing a negative return.
Another argument of “Now” depends on the family dynamic. Not all children are valued enough by parents and their perceived capabilities with potential vast sums of money. So this cannot be a blanket statement and we must presume this type of money transfer will not destroy the child’s outlook on life. The child will be expected to remain true to their original life path. The enrichment of their life may further a better life, freedom to pursue a dream, assist others or endow an item meaningful to a greater number of people. Parents can opt to help their children by allowing use of a second home or other property without transferring ownership to the child.
All of the preceding justification of “Now” leads to a final resolution. That unless you hold the belief that the expired parent will exist, in another meta-physical plane, overseeing and watching what happens after they leave the mortal life. How much more is the real life enjoyment of seeing the good; you as a parent can do, today, to promote a better life for the child. What is the dollar value placed on observing the result of helping out; possibly as one TV commercial puts it: “Priceless”!