Ken, a semi-retired health services executive, helped his daughter and her husband pay for college and for their home.
He’d like to start transferring more of his wealth to them via annual cash gifts — but not until he’s confident they’ve got their spending under control.
“I’m afraid to do it right now because I just don’t want it to become part of the sinkhole,” Ken, who is in his early 60s and based in the Southeast, told Business Insider. He asked BI to use his first name only for privacy reasons.
Ken is among the baby boomers who have started transferring their wealth to their adult children proactively rather than waiting to pass it down in the form of inheritance. Financial planners previously told BI it can be a good idea for parents who have the means to do it, as the money may be more useful when their adult children are in their 30s and 40s and building their own families. However, one financial planner said that boomers should put their finances through a “stress test” with their advisor before coming up with a plan to pass it out.
Ken said his daughter graduated from college without any debt, thanks to an academic scholarship and a 529 savings plan he contributed to. The plan allowed for tax-free withdrawals for education expenses. By the time his daughter got to college, the plan had about $75,000 in it. When she finished school, he gifted what remained to his daughter and covered the taxes on it.
One month out of college, Ken’s daughter got married to someone from a different financial background. Her husband paid his own way through college and graduated with $45,000 in debt. Ken said some of the personal loans his son-in-law had taken out had interest rates up to 9%.
“Unfortunately, he didn’t get a lot of guidance from his parents,” Ken said.
Starting out her adult life with debt was not the vision Ken had for his daughter. So, after paying for their wedding, he also decided he would help them pay off some of the loans. He paid off the high-interest loans outright, and his daughter also contributed with some of the money from the 529. But they still had some loans left.
They both got jobs quickly out of college and were able to build up savings. When they wanted to buy a home, Ken and his wife talked with them about financial responsibility and agreed to contribute $20,000 to the down payment.
“In that case, it had a purpose,” Ken said, noting it was an asset. “To me, that was kind of a no-brainer.”
Ken wants to start gifting them money but wants to make sure they’re saving
However, Ken said they started spending heavily while trying to furnish and improve their home. When his daughter’s husband got laid off from a job, Ken thought that might be a wake-up call, but he was able to get a new job relatively quickly.
“As a guy with a thirty-year career, I’ve been laid off. I’ve been downsized. I’ve been through all that with a family, and if you don’t have the savings, you’re essentially screwed,” he said. “They never got the gravity of it, is what I’m afraid has happened there.”
Ken said it may be partially his fault, in part because he always shielded his daughter during times when he was out of work or financially struggling.
He said the message he is trying to impress upon them now is: “Spending’s OK, but you got to have the money for the rainy day. That’s old school. Yes, that’s boomer plus, but you got to do it.”
Ken said he would like to start gifting them the annual amount that’s allowed tax-free. For an individual that figure is $18,000 in 2024, and $36,000 for a couple.
“I’d like to be more frequent in the gifting, but I just want to make sure that it just doesn’t end up in more things,” he said.
He hasn’t told his daughter he’s thinking about gifting them money, but he wants to see some evidence in the coming months and years that they would be responsible with it.
As for why he wants to start giving them money now, Ken said he’s been blessed enough financially to be in a position to afford it.
“I don’t need to wait until I’m dead for them to have the money. What’s the point? For me, it’s just sitting there,” he said.
“Being my only daughter, I cherish her like nothing else. I don’t want her suffering. So part of it’s my fault,” he said, adding, “I don’t want to make life too easy for them, but at the same time, I want to make sure that I can share.”
Have a news tip or a story to share about passing down wealth? Contact this reporter at kvlamis@businessinsider.com.
