To be clear, I'm not saying older parents will start writing blank checks to their kids. Rather, I imagine Mom and Dad will offer financial assistance for very specific things, including a down payment on a home or tuition for a grandchild's private school. The question for both the gift-giver and the receiver is whether this generosity will come with strings attached. I decided to call a few experts to get their perspective.
The Etiquette on Gifting
First I wanted to find out if there's a right or wrong way to handle giving one's money away. So I reached out to Cindy Post Senning, an etiquette expert at The Emily Post Institute.
According to Senning, there are no official rules on this topic. But in the interest of maintaining healthy relationships, she recommends that family members talk openly and parents clearly communicate if there are any expectations attached to a financial gift. If the requirements are too onerous -- say your mother-in-law insists you buy a home in her town -- then Senning says it's okay to tactfully decline the assistance.
The Emotional Side
Since money can be such an emotional hot button for a lot of families, I next chatted with Dr. Doug Welpton, a family therapist, psychologist and author of Attract Love, Intimacy and Money for his take. In his practice, he finds that when it comes to gifting, most gift-givers can't help but expect something in return. It's simply human nature.
The adult children may accept the gift and the conditions surrounding it -- especially in this economy -- but they often do so reluctantly, says Welpton. This can drive them to emotionally push their parents away. So in the end, the cash can end up straining the family's relationship.
Learning from the Rich
This may be the first time many families are thinking about estate planning in this way. And that's why there are so many potential problems to consider. But perhaps we should learn from the rich, who began gifting money to their heirs long before Congress changed the tax laws. That's why I also called Rich Morris, author of Kids, Wealth and Consequences, for his perspective.
Morris points out that wealthy families have been using assets to "incentivize" their kids for generations. These parents often put their wishes, or terms, onto paper when they draft a trust. It's not uncommon for a document to say that the cash can only be used for education or a medical emergency. While that may sound onerous to some, imagine if grandpa said you can only have the money if you marry someone from a specific religion. Don't laugh, it happens all the time.
Morris thinks this is okay. He says these families are simply trying to pass along their values. That's their prerogative and the adult children can then decide to take it or leave it.
Despite the situations I laid out above, all three experts pointed out that there are plenty of parents who truly don't want anything in return for their generosity. Indeed, Senning recently helped her son buy his first home. And Morris once received assistance from his father that enabled him to purchase a larger house. In both cases, these gifts were just gifts.
Would you accept a large gift from family even if there were strings attached?
Stacey Bradford is the author of The Wall Street Journal Financial Guidebook for New Parents.
Money, Money, Money image courtesy of Flickr, CC 2.0.
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