Paying for siblings?

<p>Hi there,</p>

<p>I'm not exactly a parent but I thought I could get an idea about what to do. This year my husband died leaving me with $400,000 from life insurance. And I'm thinking of offering to pay for his younger brother and sister to go college (they are 19 and 21.) They have expressed interest in going to college but haven't really had anyone help them or show them the way. </p>

<p>I offered to pay for classes at a community college this past semester, but I think I may have offered to late (a week before the semester started). But they are both concerned about their retail jobs. So i've been thinking of offering to pay them a monthly stipend if they take classes next semester. And if they should do well at the community college i'd pay for them to go to a university. </p>

<p>Is this a good idea? I'm concerned about them thinking I'm bribing them. I'm thinking of doing this because i know my husband wanted them to go to college and also I feel like they may be a bit lost. I'm not sure if this would motivate them, or make them resent me. When I was in college, I was pretty focused on finishing, so I'm not really sure how they are feeling or would feel in college. </p>

<p>Any advice or ideas would be greatly appreciated. </p>

<p>You may want to ask yourself these questions:</p>

<ol>
<li> Is your financial house in order, and is the life insurance money important to keeping it in order?</li>
<li> Is the siblings’ college non-attendance due to cost limitations, even for low cost community colleges and local state universities? Or are there motivation or academic preparation issues?</li>
<li> If you do offer college money, have you figured out how much you can offer to them in the context of college options? (e.g. you don’t want to offer them money to start college and then run out short of completion)</li>
</ol>

<p>You can be a great encouragement to them without giving away too much money. They need someone to believe in them, and to help them figure out what it is they are interested in. It sounds like they won’t be the traditional college students, so finding their passion and helping them figure out where/how they can fit classes into their work schedule would be a great way to get started. Spending time with them touring campuses, meeting with professors, or speaking with graduates who are employed in a field they desire to enter would honor your husband’s desires to help them.</p>

<p>I would recommend you go visit a “fee only” financial planner. Get your own finances in order, and get help determining a set amount of money that you can afford to give away to family. There needs to be a set limit, maybe per person, so that if these kids start and stop, drop out and waste your money, etc. they know there is not an endless well to keep coming back to.</p>

<p>I would also figure out how these kids can have some “skin in the game”. What will you require of them? For example, a certain grade point average to get the next semester’s tuition paid for. Or they pay for books and/or fees. Something that gives them motivation to study and learn, and not just go through the motions of college.</p>

<p>If they don’t want to accept money from you, you can draw up loan papers and make it less of a “charity” donation and more of a business transaction. Do you know them well enough to know how they will react to your generous offer? You might want to write a note saying you are fulfilling their brother’s wishes, maybe that angle would appeal to their emotions.</p>

<p>You can put the college money needed each semester - for tuition, room and board, books, fees - into a 529 plan for each student instead of giving it to them directly to avoid having to file a gift tax return (when gifting more than $14,000 per calendar year per donee) and to try to avoid affecting any need-based aid eligibility (such as Pell grant, subsidized loans). [You probably can’t be ‘on’ the 529 account (since you aren’t the parent) if you don’t want the withdrawals to affect FAFSA EFC.]</p>

<p>I agree with @powercropper to consult with a fee only financial planner - and someone also educated in tax and financial aid planning (if there is such a person).</p>

<p>Another reason to set up a 529 plan would be to avoid any mismanagement of funds you give to them. Getting the payments directly to the college in some way will avoid the temptation to burn through the money on non-college expenses.</p>

<p>You can also avoid gift taxes by paying tuition $ directly to the college. </p>

<p>^^but that will affect FAFSA EFC, refer to my post and mention of 529 instead.</p>

<p>Thank you for the replies. I am looking to meet with a financial advisor soon. </p>

<p>Also, I was wondering how my mother-in-law might feel about the whole thing. They both live with her right now and I’m not sure what she is hoping for when it comes to them. </p>

<p>Thanks all.</p>

<p>Are you going to be able to manage without your H’s income in the future? 400K may sound like a lot of money, but it can also go very quickly. Tuitions can be very expensive - 20K-45K a year without room and board. </p>

<p>"I’m not exactly a parent but I thought I could get an idea about what to do. This year my husband died leaving me with $400,000 from life insurance. And I’m thinking of offering to pay for his younger brother and sister to go college (they are 19 and 21.) </p>

<p>I’m sorry for your loss, but I would put the bulk of that towards my own retirement. Only if you have a really high paying job in the moment would I redirect that towards the brother / sister’s educations. $400,000 invested between now and when you yourself retire would be a HECK of a lot of money and would put you in a good financial position. </p>

<p>

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<p>Gift taxes only become a concern if the value of the estate at death plus any gifts made during life that exceed the annual exclusion (for 2014: $14k) total more than $5.34 million (for deaths occurring in 2014; indexed for inflation). For most people, this won’t even come close to being an issue.</p>

<p>(Form 709 must still be filed if $14k/donee/year is exceeded.)</p>

<p>@pizzagirl is right.</p>

<p>So sorry for your loss. You do need to keep most/all of that money for your future…to buy a home, for retirement, etc.</p>

<p>I’m not saying that you can’t help your siblings at all, but paying for the educations will likely put your own future at risk. </p>

<p>encourage them to find out what financial aid they qualify for. Let them work and earn much of their CC costs. You could offer to pay for their books. </p>

<p><a href=“Form%20709%20must%20still%20be%20filed%20if%20$14k/donee/year%20is%20exceeded.”>QUOTE</a>

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<p>Right, the form must be filed if the annual exclusion amount is exceed for any individual gift recipient, but until a person’s lifetime gifts above the annual exclusion amounts are greater than the estate tax exclusion ($5.34 million this year), it’s just a record keeping exercise as no tax will be owed.</p>

<p>Don’t make the offer until you have your financial affairs in order and secured as much as humanely possible and the siblings demonstrate they’re more confident in their desire for a college education than they have at this point.</p>

<p>Agree with commenters who said $400k can be blown quickly whether due to unforeseen big-ticket expenses such as unexpected medical bills. </p>

<p>I’d also consider seeking advice from a financial adviser as to how to invest the money so you’ll not only ensure some financial security for yourself, but you’ll be in a better position to help your siblings when they demonstrate their strong desire to attend college through prioritizing it first. </p>

<p>From what you’ve said about their reactions…especially their prioritizing concerns about retail jobs, it doesn’t seem like they’re quiet ready in mindset to attend just yet. </p>

<p>How old are you, OP, if you care to answer? </p>

<p>I would be very concerned that they wouldn’t finish their educations and the money will go to waste. If at some point you see them really trying in regards to school …and taking it very seriously, then maybe offer “some” help (not too much)…and have some strings attached for continued help…such as: must maintain a minimum GPA of 2.8, they must pay all costs for any dropped classes, etc.</p>

<p>Get your own financial house in order. Buy an affordable home, properly invest the rest (hey @dstark !!), and set a good example for your younger sibs.)</p>

<p>(They are her husband’s siblings).</p>

<p>I’m 28. It is a little difficult for me to think of retirement now. I’m not really certain what to do now. </p>

<p>Thank you for the responses all. </p>

<p>It’s a perfect time to think about saving for retirement because you have both a large amount of time to work in your favor (the magic of compounding) and you have a pile of assets. You really should consult with a fee-only financial adviser.</p>