Baby boomers paid college tuition and down payment for daughter, want to donate more

Baby boomers paid college tuition and down payment for daughter, want to donate more

Images by Tang Ming Tung/Getty Images

  • Ken, a semi-retired manager, helped his daughter and her husband pay for college and a house.
  • He would like to give them the annual tax-free allowance as a gift once they have their spending under control.
  • Some baby boomers are passing on proactive skills when their adult children need them most.

Ken, a semi-retired healthcare executive, helped his daughter and her husband pay for college and their home.

He would like to transfer more of his wealth to them through annual cash gifts, but not before he is sure they have their spending under control.

“I’m afraid to do it now because I just don’t want it to become part of the sinkhole,” Ken, who is in his early 60s and lives in the Southeast, told Business Insider. He asked BI to use only his first name for privacy reasons.

Ken is among the baby boomers who have begun to proactively pass on their wealth to their adult children rather than waiting to pass it on in the form of an inheritance. Financial planners previously told BI that it can be a good idea for parents who have the means to do so, as the money could be more useful when their adult children are in their 30s and 40s and starting families of their own. However, one financial planner said that boomers should “stress test” their finances with their advisor before coming up with a plan to pass it on.

Ken said his daughter graduated from college debt-free, thanks to a scholarship and a 529 savings plan he contributed to. The plan allowed tax-free withdrawals for college expenses. By the time his daughter went to college, there was about $75,000 in the plan. When she finished school, he gave the remainder to his daughter and paid the taxes.

A month after graduation, Ken’s daughter married someone from a different financial background. Her husband paid for his own education and graduated with $45,000 in debt. Ken said some of the personal loans his son-in-law took out had interest rates as high as 9%.

“Unfortunately, he didn’t get much guidance from his parents,” Ken said.

Starting her adult life in debt wasn’t what Ken had in mind for his daughter. So, after he paid for their wedding, he decided he would help them pay off some of the loans. He paid off the high-interest loans right away, and his daughter chipped in with some of the money from the 529, too. But they still had some loans left over.

They both got jobs soon after college and were able to save. When they wanted to buy a house, Ken and his wife talked to them about financial responsibility and agreed to contribute $20,000 toward the down payment.

“In that case, it had a purpose,” Ken said, noting that it was an asset. “To me, that was a no-brainer.”

Ken wants to give them money, but wants to make sure they save

However, Ken said they spent a lot of money trying to furnish and improve their home. When his daughter’s husband got laid off, Ken thought it would be a wake-up call, but he was able to find a new job relatively quickly.

“As a man with a career of 30 years, I’ve been laid off. I’ve been downsized. I’ve been through all that with a family, and if you don’t have enough savings, you’re basically screwed,” he said. “They never understood the seriousness of it, I’m afraid that’s what happened there.”

Ken said it could be partly his fault, partly because he always protected his daughter during times when he himself was unemployed or had financial problems.

He said the message he’s trying to get across to them now is, “Spending is OK, but you’ve got to have money for the rainy days. That’s old-fashioned. Yeah, that’s boomer plus, but you’ve got to do it.”

Ken said he would like to give them the annual amount that is tax-free. For an individual that amount is $18,000 in 2024 and $36,000 for a couple.

“I would like to give gifts more often, but I want to make sure it doesn’t end up in more things,” he said.

He hasn’t yet told his daughter that he’s considering giving them money, but he wants to see evidence in the months and years ahead that they’re using it responsibly.

When asked why he wants to give them money now, Ken replied that he is financially blessed and can afford to do so.

“I don’t have to wait until I’m dead for them to have the money. What’s the point? For me, it’s just sitting there,” he said.

“As my only daughter, I cherish her like no other. I don’t want her to suffer. So part of it is my fault,” he said, adding: “I don’t want to make life too easy for them, but at the same time I want to make sure I can share it.”

Do you have a news tip or story to share about passing on wealth? Contact this reporter at [email protected].