# At what age should I give away excess money... or should I



## Retiredguy (Jul 24, 2013)

Presuming one has more than enough money to fund their retirement. Does anyone have any thoughts as to when to give money to adult married kids . Any experience doing this with good or bad results you'd like to share? Most will get it when their parents die, why not sooner?

Trying to think of some strategy to take advantage of OAS.


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## MoneyGal (Apr 24, 2009)

OAS is calculated on income, not assets - I'm not sure how giving money to kids could or would impact your eligibility for OAS.


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## FrugalTrader (Oct 13, 2008)

Not unless his assets are in non-registered dividend stocks, then the gross up may affect his OAS payments.


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## MoneyGal (Apr 24, 2009)

Whoops, yes, of course.


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## birdman (Feb 12, 2013)

Wow, interesting thread. I have been thinking about the same thing and my wife and I plan to gift most of our unregistered cash to our 2 children "sometime". My wife and I are in our mid 60's + . I have discussed this with our children and have told them that we are not sure when to do the actual transfer(s) but have told them that it will not be for a while.
Our reasoning for considering this in the first place is that we would like to see our children enjoy the money while we are alive and of course to reduce probate costs. In regards to "when", I think it important that the children are established with there own career and finances which fortunately ours are. They could certainly do with our help but don't require it and do fine on their own. They own their own homes but a large paydown of their mortgage would surely be welcomed. Before I go on further I would like to say that we have not to date given any large gifts for things like cars, vacations, etc but have given each of them several thousand dollars at one time for a couple of things (eg initial contribution to an RESP). We also gave them $20,000. as a wedding gift instead of help paying for an expensive wedding. Fortunately, both of these gifts went towards their housing. Perhap[s a trip to Disneyland with the grandkids could be in the future. 
Of course one big thing in gifting significant sums is the stability of your childrens marriage (if married) but I believe there may be recent legislation that excludes larger gifts and inheritances from spouses in case of separation. Regardless of this I think this is one thing one should be aware of. The other thing which is difficult to explain is your relationship with your children and their spouses. Again, we are fortunate here as well as when discussing the subject with them they all voluntarily stated that "if we did give them a large chunk of cash they would still recognize the gift as being our money in case it was needed later in life for health, long term care, etc". While we would certainly hope to retain sufficient cash to look after our needs their words were comforting. 
So, I can't say when we are planning on doing the gifting but expect it will be after we have done the things on our bucket list and perhaps moved from our larger home to something smaller. Best guess is 10 years or so.
PM me if you wish.


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## kcowan (Jul 1, 2010)

I contribute the maximum eligible amount to the grandkids RESPs ($12,500) each year plus outsized birthday/Christmas gifts. That will have to do until I have to draw down on my RRIF. Then I will probably donate low ACB stocks to charity to get out from under some of the capital gains liability. While reducing the size of the estate, this will also increase the after-tax value of it.


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## MoneyGal (Apr 24, 2009)

While it is true that gifts and inheritances can be "excluded property" in the event of divorce, there are many simple ways that status can be lost...if the funds are used to pay down a mortgage or are otherwise "intermingled" with joint property (placed in a joint bank account, used to fund joint expenses), they can be succesfully argued to form part of the assets subject to division. Seek legal advice!


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## Eclectic12 (Oct 20, 2010)

Retiredguy said:


> Presuming one has more than enough money to fund their retirement.
> 
> Does anyone have any thoughts as to when to give money to adult married kids .
> Any experience doing this with good or bad results you'd like to share?


My parents have done a couple of rounds of "here's a chunk of the estate", split by all of the kids. One share is managed by my sister and I as my brother is mentally challenged & would spend it all on coffee/donuts/chips.

I believe the equal split has worked well as it shortens any conversations where someone is concerned that they didn't get their share. I believe but have not confirmed that was one round was generated by the less financially prepared brother needing some help.

The first round of gifts was when most of us were settling into our careers so it also had the benefit of being given when it would be of most benefit to the kids. As my friend used to say - it would have been nice to get a gift to help out with the wedding costs when he was short of cash instead of a gift that didn't really mean that much as he'd progressed to making a six figure salary.

The closest to a "bad" result is that my mom is concerned that too much help for that brother will encourage a steady stream of requests. So they've kept it random and at times have said "not at this time", listing concerns about rising health care costs, living costs etc.

I'm sure though in some families, gifts would cause a lot of distrust & dissection so it's good to keep the family dynamics in mind. 




Retiredguy said:


> Most will get it when their parents die, why not sooner?


The most common reasons I've heard (only a few from my parents) are concerns about how the money will be used, making the kids dependent on such gifts, rising living costs giving rise to fears of running out of money and generally not being comfortable discussing money which makes it difficult to ensure it is understood to be part of the inheritance.

And in some cases, it's a combination of "force of habit" as well as not having enough experience with estates to see the difference between giving a taxes already paid gift today versus a future tax bill.


Cheers


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## peterk (May 16, 2010)

Not that I've thought much about this, as I'm only 26, but when my grandparents gift money to my parents (which is infrequent - every other year perhaps) it's usually associated with a one time event.

"Happy 25th anniversary - take some money!"
"we just sold the boat - here's a pile of cash!" 
"Thanks for painting the deck - let me write you a big cheque!"

etc.

I think this is smart because it does not set up a precedent, nor is it a gift based on a perceived need, nor in celebration of a regularly scheduled holiday where an expectation of a gift could develop over time (christmas money, etc.)


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## Retiredguy (Jul 24, 2013)

A bit more info to add to my original post.

Yes, to be clear our assets produce income which if reduced enough would get us out of clawback territory. As part of the strategy we would both defer taking our OAS until 70. Thereby being eligible to receive the max OAS amount and obviously further down the road of life. (approx. 10 years from now).

Presently we have given each child 100k with the only stipulation that it went against their mortgage and they must continue to pay their mortage as if the money had not been given, with the intent being that it will reduce the amortization. We made it clear to all children/spouses that we would always be equal with the money and I have documented the gifts kept the emails etc. We considered trying to attach other strings but decided not to. Of course there are risks, marriage failure and money misuse, but in the end we just decided we can't control what happens and letting go of the money goes along with letting go of the kids and them deciding their futures. 

Strangely I feel quite liberated after doing it.

Although for now that's it, as we are still young ourselves and our kids are relatively young too, but we very probably will incorporate early inheritance giving as part of our over all retirement strategy.


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## Retiredguy (Jul 24, 2013)

Peterk - I think your last sentence is a very astute comment. Thank you. 




peterk said:


> Not that I've thought much about this, as I'm only 26, but when my grandparents gift money to my parents (which is infrequent - every other year perhaps) it's usually associated with a one time event.
> 
> "Happy 25th anniversary - take some money!"
> "we just sold the boat - here's a pile of cash!"
> ...


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## kcowan (Jul 1, 2010)

peterk said:


> I think this is smart because it does not set up a precedent, nor is it a gift based on a perceived need...


Yes I gifted $50k to each of my heirs when my brother died. I said it was because he appreciated their help (he was in Toronto as were they). They each purchased cottages as a result so I think it made a difference.


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## Retiredguy (Jul 24, 2013)

Frase, great post with lots of good ideas, thanks. I guess the only thing I would disagree with is your kids comments regarding still thinking it is your money if needed in the future. Easy words to say and maybe nice to hear when receiving/giving the gift but I'm not sure I would be comforted by them. As we agree... many life events, divorce relationships problems etc. can unfold. You'll see elsewhere that I elaborated on my original post that in fact we have given our kids/spouses some money. The first criteria for my wife and I in giving money to the kids was that it would only be done if we concluded that we will never need the money. Frankly, we didn't save / invest to make our future secure, only to give it away and become beholden to our kids/spouses. When we gave the money we made it clear in our minds that we regarded it as a irrevocable gift.... no longer ours and to the extent possible we would never use the gift as leverage or to throw in anyones face during difficult times. 


......"Again, we are fortunate here as well as when discussing the subject with them they all voluntarily stated that "if we did give them a large chunk of cash they would still recognize the gift as being our money in case it was needed later in life for health, long term care, etc". While we would certainly hope to retain sufficient cash to look after our needs their words were comforting. 
PM me if you wish.[/QUOTE]


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## Retiredguy (Jul 24, 2013)

FrugalTrader said:


> Not unless his assets are in non-registered dividend stocks, then the gross up may affect his OAS payments.




Correct!


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## sags (May 15, 2010)

Most of the reasons I have seen used for not gifting heirs early, would be just as applicable to leaving a large sum after death. One possible exception is age.

My uncle is 85, a widower, and a millionaire with an income that greatly exceeds his expenses. He told my 82 year old dad (his brother) that he was part of his estate and would receive a 20% portion of the estate. My dad passed away and therefore received nothing from his brother. Of course, there was no moral or legal requirement for my uncle to "gift" my dad while he was alive and living on a much smaller income, but in retrospect what good did it do.........not to give it earlier.

My uncle missed trips they could have taken together, more frequent visits together they could have had, dinners out together.... .....opportunities forever lost...........

I knew an older fellow who had everything to eat and drink delivered to his home. He had a stack of credit card slips which he kept neatly on a table and each month he paid off the bill. He didn't care how much anything cost.

As he put it..........."at this stage of my life, money is just numbers on a page".

One thing though...........as I see people often want to ensure the money is "well spent" or whatever.................

Once given.........the money or gift doesn't belong to us anymore, no more than we can manage our estate from our graves.


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## donald (Apr 18, 2011)

I think mortality plays a big role(other people dye not you)I think gifting large amounts is ''signaling" the end of life is very near,it's something that one wants to do ''later'' just not that day/month/year ect(guess)
Nobody know when there time is up and we ''all'' think were going to live forever.
If your 85 and healthy how are you going to know when it is time?You could still live 25 yrs from that date.
I think it is easy to think of others dying than oneself,I'm sure there are some on cmf that might only have 2/5/10 yrs left in life,they don't know it,or want to even think about it(young people included)how do you prepare for that.


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## stephenheath (Apr 3, 2009)

I know of some grandparents with excess cash but concerns for the future who are handling both (including the lack of desire for income but the desire for asset protection) by taking over the mortgages of their grandchildren and letting the grandchildren pay them at 0% interest. The grandparents have their cash steadily returning to them each month in case they need it, and the grandkids avoid giving whackloads of money to the bank. You'd have to be pretty sure your grandkids wouldn't lose their job or something, I'd guess, and I know they treated it formally with a contract and everything.


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## OhGreatGuru (May 24, 2009)

I think lending money to your grandkids in this way is fraught with risk and a recipe for family conflict. If they default for any reason, are you really going to foreclose on them? And the other family members will all take different sides as to what you should do.


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## Retiredguy (Jul 24, 2013)

stephenheath said:


> I know of some grandparents with excess cash but concerns for the future who are handling both (including the lack of desire for income but the desire for asset protection) by taking over the mortgages of their grandchildren and letting the grandchildren pay them at 0% interest. The grandparents have their cash steadily returning to them each month in case they need it, and the grandkids avoid giving whackloads of money to the bank. You'd have to be pretty sure your grandkids wouldn't lose their job or something, I'd guess, and I know they treated it formally with a contract and everything.


I think that's great if it all works as planned but if the kids for what ever reason don't pay, a life altering major family issue would arise. That they have it all documented might in the end save them legally & financially but they wouldn't be spared from the family upset and turmoil. A terrible thing for them to endure.

One friend of mine sold his business at a discount to his son, who also had been working in it for many years. It was all documented and the father was counting on the payments from the business sale to fund his retirement. What happened, the son thought he was a big shot, fancy cars, house, golf clubbing etc. and 2008 hit, revenues at the business fell drastically and the first person not to get paid was the dad. Meanwhile the son kept his lavious life style and started telling everyone that his dad ripped him off on the business price. Their relationship was destroyed. Lawyers got involved and the Dad in his mid 70's is struggling to make ends meet. I know of other such stories and I've decided that if I'm giving away some money it will be without strings attached. Although I have thought of a version of what you said. I sell my stocks and fund the kids mortgage. I re buy the stocks on margin and the kids gift me the monthly (interest and principal) to pay my margin account. The net result would be that the kids mortgage interest payment would be tax deductible through me and I would reduce the mortage amount with the tax advantage I receive. With a large interest deduction the OAS clawback amount would also be reduced

The numbers work and I could do it but for the reasons set out above I'm very hesitant to do it.


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## stephenheath (Apr 3, 2009)

Retiredguy said:


> The numbers work and I could do it but for the reasons set out above I'm very hesitant to do it.


Yep... it's definately got some risks, and I guess it would depend on how long a mortgage they've got left... if they've only got 5 or 10 years it's very different from them starting out with a 30 year special. Probably easiest for families with only one grandkid or excess money, because as someone else said, if they don't pay what are you going to do, kick em out of the house?


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## fraser (May 15, 2010)

Retiredguy...we have exactly the same issue. We have decided to wait as our children are only in their mid/late 20's. I feel that they need to experience some challenging personal finance times in order to learn those important lessons that last a lifetime. So we have decided to wait, perhaps for as long as 10 years. That is not to say that we will not reach out and provide some gifting from time to time but it will not be substantial.

A family lesson passed on to me from my grandfather's generation was never go into business or invest in a relatives business. We were approached twice-both financial and participation- but declined for this very reason. This turned out to be a very sound financial and personal decision. After all, it would be extremely difficult to foreclose on a mortgage or call a loan that you had extended to a family member.


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## kcowan (Jul 1, 2010)

fraser said:


> After all, it would be extremely difficult to foreclose on a mortgage or call a loan that you had extended to a family member.


And if it not specifically mentioned in the will, your premature death could create an immediate call for the funds.


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