Monday, July 16, 2012

A Surprising Financial Gift from Mom

About a year and half ago my grandfather decided to go ahead and give his children an early inheritance. Due to relatively favorable estate tax laws, he and my grandmother gifted roughly half of their estate to their four children. They figured it would be cheaper to pay gift taxes at that point (which I believe were in the 30% range) than risk dying when the estate tax skyrocketed back upwards of 50% (which it was scheduled to do within a year or so).

They have always been very concerned about the tax rate to be paid by their heirs on their inheritances after their deaths. Personally I think I'd be more concerned about making sure I had enough money give and spend during my life as I saw fit; I can't imagine losing much sleep over how much my kids might one day get after my death and after taxes. But that's just me.

Well the estate laws are still favorable, and now he's worried they will change for the worse in 2012 (despite my prediction that no one is going to touch those laws with a 10 foot pole in an election year). So he decided to squeeze in another big gift in the last week of 2011 - allegedly his last until the final bequest. Each of his kids got another unexpected chunk of change in December, and to my surprise my mother decided to direct part of her windfall to me and my sisters.

I have no idea why; when she first ran the idea by me a few weeks ago I pointed out that she could easily live another 4 decades and should probably remain in the "accumulation" stage of wealth for awhile longer before considering the "sharing & giving away" stage. After all I'd rather go without the gifts now and avoid having to pay for her retirement home later, which I bluntly told her.

But she brushed my comments off and said she wanted to do it and the paperwork was already in process. We are each getting $50,000. She was concerned however about whether to direct the funds to us as individuals or have it deposited into our trust funds, where a trustee would stand between us and any spending of the money.

The issue is that my uncle is trustee of my sisters' and my trusts, and we've all had some concerns about him lately. In addition, she really wanted us to be able to - and have to - manage the money ourselves. I'm the only sibling who works in finance, and the two youngest in particular are relatively new to the workforce and to dealing with budgeting and investing.

She wants us to have freedom to use it or save it how we please, but she also doesn't want us to blow it. I told her that in any case it would be a good test. If one of us blew the money or frittered it away over a couple of years, the lesson would be learned with a relatively small amount of money - and well before my mom is considering larger gifts down the road.

So in addition to the severance check and the signing bonus I'm expecting, I now have another $50K to anticipate this month. I can't believe all my savings goals will be reached in a matter of weeks. I don't feel like I deserve this really, and I'm fully aware that with these blessings come the responsibility to do something meaningful and give back. I'll have to mull that over.

But for the short term I will fully enjoy the comfort and security that comes with the fattest bank account balance I've ever had!

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