30 Jul Helping your kids, but being fair

 Q. I have two children and one is not responsible with money and often asks for help. The responsible one never asks for anything. What can I do to make sure things even out in the end?

A. If you’re not careful, this can turn into quite a mess.

But we guess you’re anticipating that already.

“It can create problems with the kids, with one thinking they are getting an unfair deal. ‘Mom always liked you better,'” said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton. “These generally get worse over time.”

Lynch said your help to your needy child may leave him in bigger trouble because he will live beyond his means — thinking you’ll bail him out — and never learn fiscal responsibility.

And it can hurt your relationship with both kids.

“The one getting the money thinks you’re too controlling with your money. The other thinks you are giving special treatment and playing favorites with the other,” he said.

Plus, this can potentially impact your retirement later, Lynch said.

He said you should cut it off before it gets out of control.

So what are your options?

One is to make lifetime gifts equally, regardless of the fact that one child does not need or ask for the funds whereas the other child does, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

Another option is to not make gifts during life, but instead make long-term loans to the child requiring the funds during life, she said.

“These loans should be documented and not forgiven at your death,” she said. “Instead, upon your death, the loans can be satisfied from the debtor child’s share of your estate.”

Alternatively, Romania said, your will can direct that your other child first receive an amount equal to all outstanding loans, and only then can the loans be forgiven and the remainder of the estate be divided. In essence, this will equalize the amounts the children receive from you in life and death, she said.

If you use loans, revisions to your will are going to be needed to reflect the loans and your intent with respect to repayment and equalization. You should meet with an experienced estate planning attorney for this, and to get other suggestions depending on your assets and financial circumstances, she said.

Thinking even longer term, given that one of your adult kids isn’t responsible with money, you should consider creating a trust in your will to hold the funds bequeathed to that child, Romania said. Although income could be distributed annually, principal would be distributed at the trustee’s discretion and/or at fixed intervals in order to avoid the child using the entire inheritance immediately, which would then leave no additional funds for future needs. If you take that route, you’d have to assign a trustee, which could be your other child or another responsible adult.

“Also consider that it is not too late to start teaching your child to become more financially responsible by setting limits on the help you provide, requiring a plan of repayment, or having the child meet with an accountant or other financial advisor to get his/her financial affairs in order,” Romania said.

Or send your kid to a free money makeover with NJMoneyHelp.com.

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This story was first posted in July 2015.