When One Adult Child Needs More Financial Help Than Another
Advice for parents who want to be kind without splitting the family
Some boomer and Gen X parents want to assist their grown children financially from time to time, either to enhance their kids’ lives or because their sons or daughters are struggling financially. But when is it okay to help one child more than another? And what’s the best way to do this without upsetting the family?
Theoretically, you’d always want to treat each child the same. But in reality, not all adult kids have the same financial needs, due to varying career paths and circumstances. As Roger Hobby, executive vice president of private wealth management at Fidelity Investments, says: “When children are little, what is 'fair’ tends to be equal. But as they get older, the concept of fairness between adult children gets more complex.”
Hobby recalls working with a Philadelphia-area couple with three adult children. The oldest son had a lucrative career and the daughter — youngest of the three — was also pretty well off. But the younger son (in the middle) had gotten divorced and his settlement significantly reduced his disposable income. The parents wanted to help him, but worried that giving this son more of their assets than his siblings would cause discord in the family.
Even when families have open communication and financial transparency, however, that doesn't mean every family member will agree on what's fair.
“Recognizing how much they loved their children and seeing how conflicted they were about what to do, I advised the parents to have an open discussion with all three children together,” says Hobby. “The five of them sat down and co-created a division of assets that everyone thought was fair.”
A Case For Financial Transparency
While parents aren’t obligated to discuss such decisions with their adult children, transparency can be beneficial to their relationships.
"Let's suppose parents choose to give money to one of their children,” says Hobby. “They decide to keep it a secret from their other children because they don't want to embarrass the child that was struggling. But then the other kids find out that this happened without their knowledge. The opaqueness of the situation can result in hurt feelings and distrust amongst all the family members."
Dr. Laurel Steinberg, a clinical psychotherapist in New York City, adds: “It's probably a good idea for parents to inform their children if one child has received money, both to explain their reasons and to get them used to the idea over time. This could prevent them from feeling bad or arguing with their siblings later on.”
Issues of Entitlement
Even when families have open communication and financial transparency, however, that doesn’t mean every family member will agree on what’s fair.
Adult children may feel their parents owe them an equal share of their estate and get upset that the needy sibling is or will receive more than his or her share. They may feel anger towards that brother or sister for taking advantage of their parents' generosity or toward their parents for rewarding a child who has made poor life decisions.
Hobby’s view: "Parents are within their rights to give their adult kids a voice, but not a vote, when it comes to financial decisions. They can listen to their concerns. But ultimately, adult children are not entitled to an equitable distribution of their parents' assets. That decision is solely and legally the parents’ to make, regardless of whether the kids agree or think it’s fair.”
Spell It Out
If you choose to give your adult children financial assistance while you are alive (as opposed to in your will), experts say that it's essential to stipulate, preferably in writing, if you consider this money to be a loan, a gift or an advance on their share of the estate.
Michael Tanney, director of Magnus Financial Group in New York City, says, “This can become a big issue if parents pass away and the adult child says, 'Mom and Dad gave me this money as a gift to buy my home,' but the siblings were under the impression that this money was supposed to repaid to the parents.”
Finally, it's important for both parents and children not to confuse love and money.
One of the reasons the family Hobby worked with was able to come to an amicable decision is because all the parties valued family harmony more than financial gain. While the parents were giving more money to one of their children, all three kids felt loved equally, says Hobby.