Gifts with Strings Attached

'Tis the season to give money away. Is it possible to donate--and reap some financial benefits yourself? Glad you asked.

Jean Chatzky
Photograph: Levi Brown

A caveat: To help minimize any resentment later, explain to your children that you’ll continue the funding as long as you can and that if a change in your finances forces you to stop, you’ll give them as much notice as possible. If you don’t think you’ll be able to write those checks forever, you could do it sporadically and surprise them. (It’s not an option to put the money into a secret account in their names.)

Another way to shield your children from estate taxes is with life insurance. When you die, the insurance proceeds pass tax free to your kids, who can use them to pay the taxes on your estate. The key, says estate-planning attorney Robert Clofine, is not to own the life insurance yourself, because then the assets will be factored into your estate. Instead, put the life insurance into a trust set up to benefit your heirs, and name someone else, who has the children’s interests in mind, as trustee.

Giving to your alma mater
Colleges make it easy not just to give a simple cash donation but also to set up scholarship funds. Although endowing a full scholarship generally costs $125,000 to $500,000, you can often endow a partial one for $25,000. How much control you have over it tends to correlate with the amount of money you give (more cash = more influence, such as being able to name the scholarship or specify the selection criteria), and generally no lawyers are necessary. You can get details from your alumni relations department.

Parents may wonder if giving money to a college will help their teenager get a coveted acceptance letter come springtime. Short answer: probably not. There is no standard amount you can donate that will pry open the doors of a top-tier school for a child who has low test scores and poor grades, says Michael Goran of IvySelect College Consulting. That said, a history of giving can tip the scales a bit, especially if you also volunteer your time to the college. Offer to interview prospective students, direct the local alumni group or speak on campus about your area of expertise. And if your child still isn’t accepted, comfort yourself by thinking of all the future scientists, doctors and teachers your donations will have helped educate.


Originally published in the December 2010/January 2011 issue of More. For more of Jean Chatzky’s columns in More, click here.

First Published December 1, 2010

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