8 rules for giving money to family

Giving money to family members can help show you care and is especially convenient if they live far away. Maybe you don’t know what they would like for their birthday or to help them pay for their medical bills.

Whatever your reason, there are some important factors to consider before sending your gift. Potential tax implications top the list from a legal perspective, especially if you’re sending a large amount. There are also rules of thumb and considerations more rooted in etiquette and family dynamics to keep in mind.

Let’s look at eight rules for giving money to family in 2024 so you’re as prepared as possible.

1. Understand the financial situation of the beneficiary

Think about your family member’s financial situation. Is this person struggling to keep up with mounting medical bills? Are they able to pay their bills regularly? Have they been trying to save for a home for years and are having trouble meeting the down payment requirements?

Giving money to family members can be more helpful than traditional gifts and even meaningful if that person is facing financial obstacles or working toward a goal. For example, if the money you give helps your loved one pay their mortgage for several months, it could give them space to better care for their children.

2. Identify the purpose of the gift

Why are you giving money in the first place? Is giving this family member money for a specific purpose, like books for their college classes? Or maybe your grandson is hoping to start a business?

Understanding the purpose of your donation can help you set clear expectations for how you want the money to be spent. Before sending the money, you might want to have a conversation with the recipient so they understand the purpose of your gift.

Say you are give money for a weddingFor example. Consider letting the newly married couple know that you would like them to use the money for their honeymoon, the furniture for their new home, or the down payment for their future home.

3. Determine the amount

One of the most important rules about giving money to family is to take stock of your financial situation before deciding how much to give. Of course, you want to show your family that you care or even support them in times of financial need.

But don’t neglect your own financial stability. How would your family feel knowing that you are giving them money without worrying about your own needs?

Whether you’re giving money for a graduation or a birthday, look at your finances first. Think about how much of your budget goes to your necessities and how much is left over. Don’t lose sight of your own financial goals, such as saving for a vacation or retirement, when deciding how much to give.

4. Know the tax implications

In some countries, such as the United States, you may not be able to give money to family members tax-free as long as it’s below a certain amount.

For example, the IRS rules for gifting money to family in 2024 state that you can give up to $18,000 to any person during the year without having to report the gift to the IRS. This is called the gift tax exclusion, and the amount is subject to change each year. Exceeding the amount does not necessarily mean you or the recipient will pay taxes on the gift. But you may need to attach a form to your tax return showing that you donated more than the annual exclusion amount. You’ll only have to pay taxes if you’ve exceeded your lifetime gift tax exclusion, which in 2024 is $13.61 million.

It’s just the American rule. When giving money, even to family members, be sure to check the tax rules where you (and potentially your recipient) live. Since tax laws can be complicated, it would be best to consult a financial professional to understand the tax implications of your donation.

5. Understand the legal considerations

Besides taxes, legal considerations may arise when giving money to family members, especially if you want to give a large amount. In some cases, you may need to provide official documentation proving that it is a gift.

For example, in the UK and US you can gift money to your family members to contribute towards a house deposit. Although there is usually no limit on the amount, real estate lenders require that you provide a written letter officially stating that you are giving the money as a gift. Some other requirements might be to indicate where the money is coming from and your government-issued ID.

Before you do anything, consider checking the legal implications with a trusted attorney in your jurisdiction.

6. Analyze the impact on your relationships

Money can be a source of both happiness and tension. Giving money to family can be especially rewarding, knowing that you are helping. However, this can also sometimes create tension or expectations. If you give money regularly, your family members may expect to receive that money regularly, and it could do more harm than good if you stop. Other family members may also become resentful if you give money to one family member and not others.

Ultimately, it’s up to you whether you give money to your family members, as well as how often and how much. If you think there might be negative impacts on your relationships, be careful. This may require taking the time to openly and honestly communicate to everyone the purpose of your donation.

7. Set personal boundaries

Part of managing expectations around donating money is setting clear limits on how much and when you’ll give. Maybe you want send money online regularly to a family member because he lost his job. In this case, you want to be sure to set clear expectations for how long you will send money.

For example, you can let this person know that you will only send money for the next four months to help them pay for housing until they find a new job. Or you can ask them to let you know if they get a job before four months so you can stop sending money.

Establishing clear personal rules about giving money to family can protect your financial well-being and your relationship with your family.

8. Consider gift alternatives

Ultimately, it’s up to you how you want to approach the etiquette and rules of donating money to family. Of course, you must comply with tax and legal requirements. But you also need to consider your personal limits and limits.

Sometimes donating a large amount of money is not an appropriate solution, for example if you cannot afford it. Instead, you can find other ways to support a family member.

For example, if all you can afford is to help pay for diapers for your niece’s newborn, that’s not a problem. Or, if you’re concerned that your son won’t find a reliable car to get to and from work, consider helping him cover his car loan payments.

This article was originally published on westernunion.com and was syndicated by MediaFeed.org

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