Because You Asked: Should I Give My Adult Children Money?

Because You Asked: Should I Give My Adult Children Money? 

While there are an almost innumerable number of circumstances and considerations that play into the answers to this question, and our standard response is “It depends”.

What are some of the factors to consider in deciding to gift to my adult children?

  1. Begin with a thorough assessment, conducted with a financial advisor if you have one, of your own needs:
    • Do you have enough resources for your own expenses?
    • Do you have your emergency savings?
    • If in retirement, have you run projections to at least have some idea if your resources can enable you to live comfortably during your and your spouse’s lifespan?
  2. Obtain a clear understanding of the purpose of the gift:
    • Is it to pay bills?
    • Invest in real estate or a business?
    • Help with medical expenses?
    • Assist with educational expenses for your child or grandchildren? If for educational expenses, have you considered a 529 Education Savings Plan?  We wrote about those earlier this year.
  3. Clearly state the terms:
    • Is this an outright gift, with no expectation of repayment?
    • Is it a loan? If a loan, you will need to work with your child to establish repayment terms and some nominal interest rate.
  4. Empowerment vs. Dependency: Consider whether the impact of the gift will be empowering and assist the individual to move forward, or could you be creating a sense of dependency, which could become very destructive to the child personally and to your relationship.

What are some of the best ways to give to my children? Cash, Stocks, Property

  1. You can give outright gifts of cash, if you have it to spare. Tax considerations are that an individual can give up to $15,000 per year to any other individual without having to file a gift tax return.  The recipient is not taxed, and you will not be taxed either, but you will need to document it, if over $15,000.  However, if you are married, you may gift $15,000 each so $30,000 total, to any individual in a year, without having to file a gift tax return.  *Please keep in mind that the $15,000/$30,000 gift limitation is inclusive of all gifts given in a calendar year to an individual: birthdays, holidays, etc.
  2. If your child has established an investment account, you can also gift appreciated stock to them, without you having to liquidate it first and pay taxes on the capital gains. If they wish to liquidate it at any point, they would be responsible for any capital gains taxes due; probably at a lower rate than what your tax rate would be.
  3. Gifts of Property: You may be purchasing a new vehicle and wish to gift your former vehicle to your child. You would still need to keep that $15,000 limit ($30,000 if married) in mind, as it relates to the fair market value of the vehicle.
    • Generally, if you are intending to gift real estate assets to your children, they and you will be better served tax-wise if you wait and pass the title to them at your death, so they will receive a step-up in basis at the time of the gift.  Otherwise, your gift could have unintended tax consequences.

Is there anything else I should consider?

One of the most important considerations is what is the gift going to cost you?  Specifically, I am referring to individuals I have known who took distributions from an Individual Retirement Account or similar tax-sheltered account to give money to their children.  Generally, this is not a strategy we would recommend, because you are going to pay taxes on that distribution.  If you absolutely must do so, perhaps the child receiving the gift or loan would be able to pay the taxes due.

Another final consideration is that if you have adequate resources, it can be very beneficial to give to your adult children, which can help them at a time in their lives where life can be more of a struggle, rather than having them wait until you are deceased.  If you have more than one child, perhaps you would want to plan to gift equally in some measure to all of them, taking into account their individual needs and situations.  It can be a great blessing to your children and be very gratifying for you to see them enjoying the results of your gifts.


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