<p>Haven't seen today's NYT column by The Ethicist discussed yet:</p>
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I began saving for my two sons college education 18 years ago through U.G.M.A. accounts, whose funds revert to the beneficiary at 21. My older son attends a state school and could have $100,000 remaining when he graduates. My younger son will likely go to a private school and perhaps grad school and could deplete his account. May I ask my older son to share his remaining money with his brother?
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<p>Interesting. As the choice of college is just that – a choice – I’d split the $$ equally between the two. It’s not as if one boy has serious medical concerns, and will need more financial resources devoted to him than his sibling will require.</p>
<p>The money is legally the older son’s, so what a parent might want to do with it is irrelevant, which is why the parent has to ask the older son to share. The parent cannot make the older son do so.</p>
<p>Legally, if the older son is not yet 21, now is the time to deplete that UGMA account. And do the same for the younger boy, too. You can pay yourself back for any expenses specifically for the benefit of the child (music lessons, new baseball cleats, private school tuition, etc.). Once the money is back in your hands you can control its distribution.</p>
<p>If the older boy has reached age 21, it is legally his money.</p>
<p>Ethically, I would find it hard to keep any of the children’s money which they contributed to the UGMA account eg. earnings or gifts.</p>
<p>This story illustrates why a UGMA account may not always be the best idea.</p>
<p>Amen, Marian. If the money were in a 529 plan it could be moved between kids, but in a UGMA the money legally belongs to the child. Also, if a child is a candidate for financial aid (doesn’t sound like anyone with $100k of extra money laying around would be) funds in the child’s name count much more heavily than funds in the parents’ names.</p>
<p>Mominva, the kid doesn’t have to be 21. It is legally HIS money from the second it goes into the account. He just doesn’t have control over it yet. If the parent spends it they must show that it was spent for the child’s benefit. Once the kid reaches legal age (and the age varies between states, it’s not always 21) the kid controls the money and the parent can’t do a thing about it.</p>
<p>I used to work for a mutual fund company. Every year we would have people send us instructions to transfer money out of their kids’ UGMA to fund the parent’s IRA, and we would have to reject the instructions. I had people say to me on the phone, “But it’s not really my kids’ money. We just put it there to avoid taxes!” We also had teens that called pretending to be their parent, trying to liquidate funds out of a UGMA to buy a car or whatever. They’d get their friend with a deep voice to call and pretend to be the dad. It was usually pretty easy to sniff them out, and pretty funny.</p>
<p>But re-reading the OP’s posting, the larger question was if the parent could ask the older child to spend his leftover money on his younger sibling. I don’t see why they couldn’t ask the older one to do that. I guess the question was more toward if parents should spend the same amount on each child?</p>
<p>Here’s the link to the full column:</p>
<p>[That’ll</a> teach you to be a responsible parent!](<a href=“http://www.nytimes.com/2008/03/09/magazine/09wwln-ethicist-t.html?_r=1&ref=magazine&oref=slogin]That’ll”>http://www.nytimes.com/2008/03/09/magazine/09wwln-ethicist-t.html?_r=1&ref=magazine&oref=slogin)</p>
<p>The ethicist says yes, you can ethically ask.</p>
<p>My ethics are that I wouldn’t ask and allow the older one to keep his savings without guilt and have a discussion with the younger one about going to a more expensive private or less expensive public. I liked how in Its a Wonderful Life George Bailey stays at home in Bedford Falls so his younger brother can go off to college and have an exciting life…but George got that idea himself, not his mom. </p>
<p>I can’t imagine there wouldn’t be major tension in the household after the parent asks S1 to give S2 $100,000 so S2 can go to a fancy-schmansy school…</p>
<p>Legally, Lafalum84 is correct in saying that the money belongs to the child and can’t be withdrawn without their permission (although until they’re 21 the child can’t withdraw the money without the parent’s, or account guardian’s, permission). </p>
<p>Ethically, I agree with the column in saying that you can ask that the money be used for this purpose. I suppose it really depends on what you intended for that money to be used for in the first place. I’m guessing that the intent was to ensure that you’re children could get a good education without having to go into debt… not that you give them a lump of money just as they start their careers (a nice boost but more of a bonus than a necessary expense). In that case then it would certainly be unfortunate if one child got a lump sum of ‘free’ money whilst the other had to go into debt for their education.</p>
<p>I suppose it depends on how well you get along with your kids and what their attitudes are towards money (especially inherited money). Ethically I think the money should first be used to pay off educational expenses and then the rest divided evenly between them… however because of the unfortunate legal arrangements of how the funds were set up in the first place that means this can only happen via the good will of the beneficiary and not the person who put the money there.</p>
<p>I tend to agree with Muffy–because the older one made frugal choices, he should fund the younger? Doesn’t seem fair to even ask, to me. Did he pick the state school with the assumption that the funds would then be available for other use? Do we know that he won’t want to further his education later on in ways that the money left might make possible? Absent more specific facts, the situation seems to suggest a favoring attitude toward the younger son (and let’s look at the numbers; if the older one will have 100K available after his education, and if the younger is equally funded, then there would seem to be adequate funds available, or close to it without even going into present income. So, we seem to be talking about paying for the youngin’s grad, not undergrad, school–making a lot of assumptions about what the older one might want to do, despite “only” having gone to a state school.)</p>
<p>I would also say no to asking the older brother to use the left over funds in his account to pay for his younger brother’s education. For the same reasons others have already stated, I think it’s a bad idea.</p>
<p>We have funded the grandchildren’s funds equally and made it clear that the leftovers are intended for grad school and for their children. Of course, they themselves can figure out that they can transfer funds among themselves when we are gone.</p>
<p>I can’t imagine there wouldn’t be major tension in the household after the parent asks S1 to give S2 $100,000 so S2 can go to a fancy-schmansy school…</p>
<p>Perhaps that is why older child was frugal in his choice- so that the money would be available after college- for grad school etc.</p>
<p>Agree with coronax2. They each have accounts - the accounts are theirs. It would be horrible if the older was asked to give his money to the younger and it ended up causing family rifts…</p>
<p>I think the intent of the account originator needs to be considered.
I know my in-laws wanted the $ to help fund college, not a vehicle or vacation, but they put gifts in the kids’ names to avoid the taxes. The were not aware that the kids could access this money before they finished school. Nor did they realize the implications that money could have on financial aid.
We were advised to stop saving in the kids’ names and to spend that money on them. The money we spent (for their camps, select travel sports, personal laptops, etc.) came from their accounts and was immediately reinvested in a ‘family’ account which we use for their education.</p>
<p>My POV as a student:
I made a decision to go to a state school so that I’d have my parent’s college savings left over for grad school or anything else. If my younger sibling decided to go to an expensive school <em>and</em> grad school, regardless of how well we could afford it, I’d be a little sore if my parents asked me to use the money they had set aside for me to fund my sibling’s perhaps unthinking decision. But I would still give the money - it’s family, after all. It would probably still cause some bitterness.</p>
<p>Anyway, that’s assuming a lot about the vague situation proposed. But I think switching the money may be punishing the older child’s responsible behavior and rewarding the younger child’s irresponsible behavior.</p>
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<p>There are two many unknowns to characterize the kids’ behavior this way. I agree with the article. If each child was told “This is an account in your name, and the money is yours to do with as you please,” then requesting a transfer of funds seems quite inappropriate. Sort of a “make your bed and lie in it” situation. But if this money was set aside specifically for the kids’ educations, and just happened to be divided up into two of this type of account (because it was convenient, not because each child was absolutely entitled to half of the funds), and each child was told “We’ve saved for your education, and we have the ability to pay for whatever school(s) you choose,” then a transfer of funds seems fair. </p>
<p>The kids could have had identical reasons for choosing the different paths that they did. Frugality may not have been any concern of the older child’s. We don’t know those reasons, we don’t know what kind of parental support they had in their decisions, we don’t know exactly what intentions the parents had for these accounts, we don’t know what the kids have been told about available funds. I hope that the parents had the foresight to realize that something like this might happen, and to explain the $$$ and the accounts in appropriate terms. I also hope they have a plan in case their older child unexpectedly decides to attend grad school in the relatively near future.</p>
<p>Having one child, we did not have this situation. However we did set up a UGMA for tuition and our ds will be graduating in May with about $45k remaining which could come in handy for grad school.</p>
<p>If a family were in the situation of the family cited in the NYT article, the question I would have to ask is why each child is making the choice of what college to attend. If the child attending a public college made this choice to have money for grad school or begin adult life with a nest egg to invest, I would have a real problem asking him to fork the remainder over. </p>
<p>In any case, I would insist that child 2 be fully responsible for his tuition, fees, books and spending money. There is more than enough to fill in the gap between this and savings through merit aid, student loans and work(summer + school year). I know because we did it. The parents should be in a position to fund the room/board expenses since not one, but 2 children are living away from home. Until I, as a parent, was doing everything to assist child #2, asking anything of child #1 would be foolish imho.</p>
<p>I do agree with you, Student615, which is why I wrote at the end “that’s assuming a lot about the vague situation proposed.” You’re right that we don’t have nearly enough motivations to make an informed decision about this. I was simply responding to a hypothetical situation that seems like one many families I know have faced.</p>
<p>However, considering that they only have so much money, it seems strange that the younger child wants to go to an expensive private school <em>and</em> grad school, when it really isn’t necessary to go to a prestigious undergrad when you plan to continue your education. Especially when it potentially will bring financial hardships on your family and siblings.</p>