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Giving money to grown up children

Gifts of money to your children represent far more than financial benefits, they may also be seen as the summing up the value of your relationship

Parents of little children often long for the day when their offspring are old enough to leave home and release them from their responsibilities. But, as Gina, a mother of six, told me the other day, 'Parenting never ends.'

And these days, with boomerang sons and daughters needing to come back to live at home after a divorce or a business failure, the responsibilities can weigh very heavy. One of the heaviest of all is the matter of being fair with money.

You have only to think of the oldest stories of family arguments to be aware of the dangers. The biblical Prodigal Son's brother was outraged when he saw treats being lavished on his wastrel sibling after he himself had stuck by his parents and worked his socks off for them without any reward at all.

Beth, a psychotherapist with three grown-up sons, told me that it just isn't possible to be fair. Whatever you do will result in someone feeling hard-done-by. She instanced the example of Susan, a client she once had, who had a hugely well-paid job in a bank and didn't need any parental help when she was buying her first house.

Even so, Susan felt bitterly resentful that her parents hadn't offered her anything when they had given her brother a lump sum for the deposit on his flat. The fact that he would never earn anything like her salary and bonuses didn't matter: Susan interpreted the lack of an offer of money as a lack of affection.

All the parents I consulted agreed that it is essential to discuss any distribution of capital sums with all their children, but I was fascinated to hear the views of Jango, a young graduate in the midst of such negotiations at the moment.

His parents had had difficult times with their own families over the sharing out of assets and were determined to avoid putting their three adult children through the same kind of conflict. They announced that they would be handing over a substantial sum and asked the three siblings to decide how it should be shared between them.

Jango said, with some passion, that this was weak, a cop-out. He felt that his parents should have made their own decision about dividing the spoils and announced it, while giving their reasons. But could any explanation satisfy everyone?

What would you do if three of your children had been sensible, hard-working, carefully saving towards deposits on their flats and houses, and one had gambled or spent everything she ever earned on cocktails, clothes and extravagant holidays? Would you help her with a deposit and ignore the others?

What if one had been immensely helpful, supporting one of you when the other had to go into hospital, always being at the end of the telephone ready to come whenever you called, and the other two had emigrated to the States or Australia and could barely bother to remember your birthdays? Wouldn't it feel fairer to give a bigger slug of money to the helpful one? What if you just liked one of your children more than the others?

And what if one of them had lots of babies and needed help with school fees, or buying a big enough house, while the other had chosen not to have children and consequently enjoyed a much more luxurious life? All choices have consequences, so shouldn't you take that into account when helping one and not the other?

In some ways it's easier when there's a medical need, but even then it's not straight forward. Selma worried about her elder daughter, who longed to have children and knew her fertility was dwindling by the month but needed a gall-bladder operation before she and her husband could try to conceive.

Selma didn't have much money to spare and wondered whether, if she did pay for the operation to avoid a long wait in the NHS queue, she ought to write a cheque for the same amount for her younger daughter to ensure fairness.

Every parent to whom I've spoken agreed that in the end it's essential to offer equal amounts of money to all the children, irrespective of their personalities, extravagance, relative wealth, helpfulness or anything else. But they made it clear, one after another, that it isn't necessary to hand the money over at the same time.

Life situations change all the time. The hugely high-earner working in the City this year may suffer burnout and retreat to Dartmoor to weave baskets next year. The absurdly extravagant party-animal may settle down and earn more than all the rest put together.

Hard though it must be to stifle the impulse to dish out equal cheques simultaneously, perhaps the fairest way is to be ready to help when needs arise and sort out the final sums in your will.

Or you could use the concept of the hotchpot*, which is bizarrely a legal term. I heard of one family who took this route, and it seemed to work pretty well. Into the notional pot went everything each sibling had had over and above the ordinary secondary-school education and normal living expenses.

One had had money to buy a car, four out of the five had been to university and one had not, one had been to law college after university, one had had help with the deposit on a flat, another had had a loan to buy a house.

All of it went it into the hotchpot, the amounts were added together and then divided by five. The resulting sum left each sibling either a debtor or a creditor of the others, with the repayments to be made when a family trust was broken or the surviving parent died.

The only flaw with a hotchpot is that no allowance is made for interest payments or inflation, which means that in times of high price volatility, the debtors will always do better than the creditors.

Absolute fairness is never going to happen, but with transparency, a refusal to manipulate or be manipulated, and a determination to give financial help whenever it is needed – but only when it is needed – you should be able to avoid arousing unbearable resentment.

But the overwhelmingly important fact to remember is that, no matter how much you have, your money is not inexhaustible and your future needs are unquantifiable.

Don't hand over more than you can afford, however much your children may want or need it. As 24-year-old Jango and his girlfriend, Stevie, kept saying to me: "It's their money. Not ours."

Written by Daphne Wright

* When contemplating any formal division of your assets or setting up a hotchpot of your own, it is always wise to consult a solicitor, who will be able to advise not only on the legal aspects but also the tax implications of whatever you intend to do.

This article was created: 21 August 2006.
This article was last edited: 11 December 2006.

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