Gifts to Children

In my opinion, having twins is poor college planning. My parents were faced with three out of the five of their children in college at the same time. As they coped with their financial challenges, I maneuvered through the world of marginal solvency as well.

In those days, long distance calls were expensive and, in my family, calling collect was forbidden. During one frugal period, I hadn't called home in over two months, weighing my expenditures heavily in favor of calls to my girlfriend who lived down the street. So, one evening I again allocated my quarters in her favor, but absent-mindedly dialed home. When my mother answered the phone, I became confused and tried to process this unforeseen event: "What is my mother doing at Mary Anne's?" My lengthy silence was finally greeted by my mother: "Jack, is that you? You were trying to call Mary Anne, weren't you?"

My mother's intuitive sense of where everything stood simply deprived me of the upper hand in my efforts to gain independence without losing parental support prematurely. As children leave the nest, their interactions with their parents frequently revolve around support issues. Sometimes the communication is clear and harmonious between parent and child and other times it is not.

In estate planning, when and how much to leave your children may be the major challenge. Too much too soon may be damaging as well as too little too late. Most of our clients will delay final distribution until age 21 but many go further and provide for assets disbursements in stages. For example, many of our clients continue the child's share in trust, with the child receiving income and : "after a child has reached the age of 25 years, the child may withdraw any part or all of the principal of his or her share at any time or times, but not to exceed in the aggregate 1/2 in value thereof prior to reaching the age of 30 years".

If I had to guess, I would say the most popular distribution in our neck of the woods is in three equal stages at ages 25, 30, and 35. Although lately the stages seemed to have moved up a notch to 30, 35, and 40.

There are many factors to consider when providing for children.

Furthermore, there is an emerging trend to use trusts as parent substitutes to a degree I have not seen before. Perhaps as a result of a significant increase in the transfer of wealth, parents are fine tuning their trusts so that their children are rewarded for positive behavior.

And some estate planners, albeit few, focus on both tax savings and family values by incorporating a mission statement reflecting the "family financial philosophy" (how much money they need for their own lifestyle and medical care; how much is appropriate for their children; and how much they want to pay in taxes or give to charity).

So there are many things to consider. One of my friends, who seemed to take great pride in controlling his children, said "control is good…I like the fact that I can control from the grave…". I don't recall experiencing tension with my parents around financial concerns. Mom wasn't controlling; she just knew.

Jack Davidson

Comments about this article? Please email Jack

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