CNBC has this interesting article highlighting a trend where wealthy family members give large amounts of cash or other items to family members (children, grandchildren, extended family, etc). While gifts can be a great tool in the estate planning repertoire, they can also create tax issues for gifts over $14,000/year (see this post with advice about gift giving for couples and singles), dependency issues (“These good intentions may be creating generations that are disabled when it comes to financial responsibility” and see The Millionaire Next Door (1998) (recommending not giving children homes in neighborhoods beyond their budget)), and other problems. Instead of giving family members cash, consider paying tuition for college classes, investing in a relative’s small business venture (assuming a well-developed business plan exists), offering to match their IRA/Roth IRA contribution (to promote good savings and retirement planning habits), hiring them to work in your family business (create a job and help them learn the value of hard work and diligence), or making them a trust beneficiary (trusts can include “strings” about beneficiary ages, completion of education, not being addicted to drugs or alcohol/living a risky lifestyle). The biblical book of Proverbs, part of the Wisdom literature of Judaism and Christianity, has much to say about money and wise stewardship, including “lazy hands make a man poor, but diligent hands bring wealth” (Proverbs 10.4), “all hard work brings a profit, but mere talk leads only to poverty” (Proverbs 14.23), “the plans of the diligent lead to profit as surely as haste leads to poverty” (Proverbs 21.5), “the borrower is servant to the lender” (Proverbs 22.7), and “a generous man will himself be blessed, for he shares his food with the poor” (Proverbs 22.9).
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(c) 2013, Stephen M. Johnson, Esq.