“We will not live beyond our money”: How do we give $10,000 to our nephews and nephews without offending the rest of the family?

My husband and I knew we had collected a large enough nest egg and would not live beyond our money. We have always intended to recognize our nephews and nephews in our will with a modest gift ($10,000 or less). However, we hope to have many more years left. Most of our nephews and nephews are just starting university or starting families.

It seemed that it would be more beneficial for them to receive a gift now. It is a pleasure to see them use this gift for a great vacation, or pay for extras while they are at school. This should be easy, but it quickly becomes anything but.

“One of her nieces has a hardship scholarship: If we give her $10,000, her college will subtract that gift from her financial aid.”

First, two of our nieces are minors. We didn’t want to give them gifts now, because we didn’t want to tax the children. Second, we also didn’t want them to feel upset when they saw their older siblings getting presents. Third, we learned that nieces and nephews in college are still considered dependents, and gifts given to them may also tax the children.

Her niece got a tough scholarship: If we gave her $10,000, her college would subtract that gift from her financial aid. Shall we give $10,000 to our nephew and another $10,000 to his new bride? It may open the way for us to make an additional gift to the remaining clan when they are married. Would giving a gift to our nephew – but not to his bride – make her feel like she’s not really part of the family?

Finally, two of our nephews have substance use disorder. Experience has already shown us that giving gifts to them can fuel poor financial choices (eg, buying more medication and possibly lead to an overdose). For them, we thought it wise to resume Plan A and recognize them in our will. However, again, we don’t want there to be hard feelings if some cousins ​​get gifts and they don’t.

We can really use some input on this.

Aunt puzzled

Dear perplexed,

You are right not to give your nieces and nephews $10,000 indiscriminately just to ensure fairness.

If you have good reason to believe that some nephews and nieces have persistent drug problems, and will spend money irresponsibly—that is, on drugs and alcohol—you shouldn’t feel compelled to do so. Every circumstance is different. You will be a de facto enabler, not a helper. Nobody will win.

However, you can put money into a trust for these relatives and/or consult with their parents about the best way to use the money: Maybe they can take advantage of help with a down payment on an apartment and/or evening classes, or even a Roth IRA or 529 plan. And yes, a gift It can affect your niece’s financial assistance. You can wait until you graduate.

It’s smart to consult with talented people before giving them money. But it can be done accurately. You don’t have to discuss a $10,000 gift with relatives B, C, and D, if you’re giving money to relative A. Don’t turn your goodwill into drama by giving public gifts and discussing your generosity with other family members. The smartest gifts are given softly.

“Don’t turn your goodwill into drama by giving public gifts and discussing your generosity with other family members.”

You can give $16,000 annually to each of your nephews, nieces and nephews without affecting your $12.06 million annual tax credit. In fact, you and your spouse can collectively donate $32,000 to a family member without filing a tax return. most countries You do not have a gift taxalthough some may clawback rules If the gifter dies soon after cashing out.

Child tax relates to unearned income rather than gifts. If it exceeds your nephews or nephews’ interest, dividends, capital gains, royalties, taxable grants, and other unearned income $2300 in any given yearYour gifts may be subject to that tax. It is designed to prevent parents and other relatives from moving income into a lower tax bracket. Read more over here.

“A gift to a minor is considered current interest and qualifies for the $16,000 exclusion if all of the following conditions are met: Both property and income can be spent by or for the minor’s benefit before the minor reaches age 21,” according to a law firm in Raleigh, North Carolina. Hughes, Bateman and Gupton.

What’s more, “all remaining property and income must pass to the minor on his or her 21st birthday,” says the law firm. And on an even scarier note: “If the minor dies before the age of 21, the property and its income are paid either to the estate of the minor or to whomever the minor may designate under general appointing power,” the company adds.

Deal with your nieces and nephews first and foremost, and be careful about setting a precedent by making big gifts for their husbands.

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