Keep these considerations in mind when helping your kids purchase big-ticket items.
Hopefully, by the time your kids reach a point where a major purchase is considered – be it a college education, a car, a wedding, a home or even a business – you’ve succeeded in teaching them the value of a dollar. This will help them understand the gravity of the decisions you’ll make as you explore how the money they need will be provided – by gift or by loan, for example.
Think of your needs first. This might be hard since it’s natural for parents to have an attitude of self-sacrifice when it comes to kids. But when it comes to your financial future, there’s no scholarship for retirement. Talk to your financial advisor to gain perspective.
In 2018, the IRS increased the annual individual gift amount to $15,000 – each parent can give a child $15,000 for a total of $30,000. Give more and you’ll need to file a gift tax form. But that doesn’t mean a tax bill. Since the individual lifetime gift exclusion amount is $11.18 million per individual, the amount over $30,000 will count toward the lifetime gift exclusion. Talk to your tax professional before you decide to gift above the annual gift exclusion amount.
Here are three important things to keep in mind when loaning money:
Expectations can be emotional. For parents, think how you might feel sitting across the table at family gatherings from someone who owes you significant money but is not always on time with payments. Adult children may not know how parents will react if they make other large purchases while still owing money. These things must be discussed in advance. If either side is uncomfortable, a loan may not be a good idea.
Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.