There are a few estate planning and personal reasons to gift money to your adult child. If your son or daughter needs a bit of a boost, giving him or her some cash may not be a bad idea. Luckily, according to NerdWallet, you can usually give up to $15,000 without worrying about the tax consequences of your gift.
If your adult child has a disability, though, giving him or her any amount of money may have catastrophic consequences. This is especially true if your son or daughter receives Supplemental Security Income, Medicaid or any other means-tested public benefits.
You may make your child ineligible for public assistance
If you have never applied for or received public assistance, you may not know exactly how needs-based benefits work. To qualify for many public programs, a person must have extremely limited assets and very little income.
Because your gift is likely to count as income for your son or daughter, your gift can push him or her over the qualifying threshold. Put differently, if it renders your child ineligible for ongoing public assistance, your generous gift may have unintended yet disastrous consequences.
You have other options
Even though you may not be able to give your adult child money without complicating his or her future life, you are not out of luck. Indeed, you have other options for improving your child’s quality of life without jeopardizing his or her eligibility for means-tested benefits.
For example, you may choose to establish a special needs trust. This trust sets money aside for your child’s benefit. Because the special needs trust is not a gift, funds in it usually do not count as income under the rules of needs-based government programs.
Ultimately, if you know your child needs some financial help from you, it is critical to examine all your estate planning options and pick the one that is right for both you and your adult son or daughter.