Even if your child has left the proverbial nest, they could still often benefit from financial support. Whether it’s helping with the down payment for a house or giving them the monetary boost to achieve something that they otherwise could not, giving money to your adult children can be easy if you understand the laws that your gift is subject to. What should you consider when giving a monetary gift to your adult child?
First, think carefully about why you are giving the gift. How could the money you are giving impact your child’s ability to live, work and succeed? Could your gift give them a boost without decreasing their motivation, or could it potentially prevent them from staying motivated and working hard? In many cases, it’s a good idea to start by giving a small amount to see how it is handled. If they do a responsible job and use it to help pay for essentials or save towards a goal, consider increasing the gift next year.
Determine the Type of Gift
Next, think about what type of monetary gift you want to give. Was your adult child laid off due to the COVID-19 pandemic? Giving a one-time gift to help get them through the winter could be a great and helpful thing if you can afford it. Are they returning to college? You can give a one-time gift or every semester either to your child or directly to the school. Remember that giving an ongoing gift or regular gift could lead your child to plan on it. If you give $1,000 every year for Christmas five years in a row, there’s a good chance your child will become dependent on that gift every year. That isn’t a bad thing, but you should be sure you can afford to do so.
Survey Your Options
Finally, keep in mind that gifts do not need to be in the form of cash or a check. You could gift your child appreciated stock or another asset. Remember that they may be on the hook for capital gains taxes depending on your gift, and you should speak with your tax advisor to determine whether or not you should file a gift tax return.
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