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Question: We are in our 60s and comfortably retired. Our daughter wants a $200K advance on her inheritance to buy a home. We’re not opposed, but what’s the cleanest way to proceed to avoid resentment? We already paid $75K for her wedding and chipped in much less for her two brothers’ weddings. To our horror, her brothers say we are being sexist! But she earns less than them.
Are they right, or are we just recognizing that daughters may need more financial help than sons?
Answer: One of the most crucial things you might have to do as a parent, both when your kids are young and when they’re grown, is avoid favoritism. If it seems like one sibling is receiving preferential treatment, your kids may come to bear ill feelings not just toward you, but toward each other.
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If your daughter is asking for a $200,000 advance on her inheritance to buy a home, and it’s money you can afford to part with, you may be eager and willing to help out. But if you’re worried about backlash from your two sons, that’s understandable — especially if you already paid $75,000 for her wedding and chipped in considerably less when your sons each got married.
It’s true that women typically earn less than men and struggle to save as much due to breaks for childcare and caretaking, but that may not be the case for your adult children. Moreover, your daughter is married and, like your sons, is in a partnership with another adult who can presumably earn an income.
Here’s how to navigate a situation like this so no one gets hurt and relationships aren’t soured.
“Parents tend to be more generous financially with daughters than with sons, [likely due] to a desire to become grandparents.”
Be mindful of biases and patterns
It’s natural to want to help all of your children financially, and your daughter may have more pressing needs right now. One trap you don’t want to fall into is favoring your daughter, even if unintentionally, because you perceive her to require more financial assistance due to her gender.
Surprise: It’s all about the grandkids.
A Rutgers study found that during tough economic times, parents tend to be more generous financially with daughters than with sons. Part of that, though, may boil down to a desire to become grandparents. Since daughters are statistically more likely to produce grandchildren than sons, parents may subconsciously throw more support their way toward that goal, especially when the economy is shaky.
“When resources are scarce, parents prefer females because they have a larger reproductive payoff,” according to the study’s author, Joseph Redden. “Almost every female child will produce some offspring, but many male children end up having zero offspring.”
The bias may be unconscious.
More recently, the American Psychological Association published research indicating that parents tend to favor daughters over sons.
But parents may not be favoring their daughters on purpose. A recent Ameriprise survey found that among parents with multiple kids, 72% plan to provide financial assistance to their children equally.
Tradition may dictate unfairness.
In this situation, it’s not surprising that $75,000 was spent on a daughter’s wedding and less was spent on her brothers’ nuptials. As SoFi confirms, it’s common practice for a bride’s family to cover major wedding expenses.
This tradition can be particularly tough in some communities. For example, a more lavish Indian-American wedding can run between $150,000 and $300,000, with the bride’s family expected to cover everything but the reception and gifts.
That said, Fidelity reports that times have changed, and that it’s become more common for the bride and groom’s families to split wedding costs more equally in the U.S. But ultimately, that decision is made on a case-by-case basis.
You may not be inclined to count the money spent on your daughter’s wedding toward her inheritance if your sons’ in-laws chipped in the equivalent amount toward their big events, as per tradition. But if your goal is to make things fair, tally up what you spent on their weddings versus the $75,000 you paid toward your daughter’s event and equalize things in your estate documents.
Transparency and documentation are key to fairness
A major reason family conflicts tend to erupt during estate planning and financial matters is a lack of communication. That’s why Barry E. Janay, principal and owner of The Law Office of Barry E. Janay, says open communication is essential.
“When parents are considering giving one child a significant advance on their inheritance in a situation where prior gifts have already been unequal, transparency is the most powerful tool available,” he insists. “An undisclosed gift of this magnitude almost always causes resentment among siblings. But a properly documented advance, communicated openly to everyone, can be managed equitably.”
Here’s how Janay says this could work in practice: The $200,000, along with the prior $75,000 wedding contribution, should be formally documented as a lifetime gift to be debited from that daughter’s share of the estate.
For example, if the estate is worth $1.2 million and is to be divided equally among three children, the daughter’s share would be reduced by $275,000. In this case, if each child would normally be entitled to $400,000, $275,000 would be deducted from the daughter’s share, and the remainder would be redistributed proportionally among all beneficiaries.
“This should be communicated to the other children — not as a punitive measure, but as a matter of fairness and family trust,” Janay says.
Janay also recommends that you make it clear to your sons that the same accommodation would be available to them if they faced a similar need.
“That framing shifts the conversation from favoritism to a flexible, need-based approach applied consistently,” he says.
Janay also thinks it’s a positive thing that the request is being framed as an advance on an inheritance rather than an outright gift, calling it a “healthy instinct.” To him, it’s a sign that the daughter isn’t looking to take advantage. She’s simply looking for help meeting a near-term goal, with the intent of making everything fair at the end of the day.
Be mindful of tax consequences
Giving your daughter an advance on her inheritance may not be problematic if everything is well-documented and discussed openly. But T.L. Turnipseed, head of personal trusts at Alta Trust Company, says that before you make that gift, you should think about the potential tax repercussions.
“The cleanest path is to decide whether the $200,000 is meant to be an advance against your daughter’s eventual inheritance or a bona fide loan that will be repaid,” he says. “Either can work, but trouble starts when a family calls something a loan and treats it like a gift, or calls it an advancement and never ties it back to the estate plan.”
Turnipseed cautions that if you treat this as an advancement for inheritance purposes, a $200,000 transfer with no repayment obligation is generally classified as a gift for federal tax purposes.
“That means the parents should expect federal gift tax reporting for the year of the transfer,” he says.
Now that doesn’t mean having to pay extra taxes in the near term per se. But it does eat into your estate’s lifetime exemption, which is currently $30 million for a couple.
If you don’t have a massive estate, using up $200,000 of your exemption may not be an issue. But if you’re worried about exceeding that exemption limit down the road, you may want to consider a loan, Turnipseed says.
A loan, he explains, “may be preferable if the parents want repayment or want to preserve transfer tax exemption for later planning. But it needs to be documented and administered like a real loan.”
If you’re going to structure the $200,00 transfer as a loan, Turnipseed suggests creating a signed promissory note, charging interest at least at the applicable federal rate, and mapping out a repayment schedule.
“Otherwise, the IRS can re-characterize some or all of it as a gift,” he warns.
