I meet parents who are retired yet still supporting their children financially. While I don't think this is a good idea (read a copy of the Millionaire Next Door by Dr. Tom Stanley), I find it particularly sad when Mom and Dad are taking money out of their cash flow and decreasing their life style, just to help junior make his mortgage payment. Here's a better way to help the kids and not get pinched in the pocket book.
Rather than taking the money out of our cash flow, you can turn a low yielding asset into income. For example, the average stock in the S&P 500 only pays a 1.25% dividend (Barrons, August 16, 1999). So many stocks will not produce a large current income. Or maybe you have raw land which pays you nothing. Those assets can be converted into extra current income that can be used to help junior. Worried about the capital gains? Here's how to beat that.
A capital gains elimination trust (10% of the money must be left to charity, so this is often called a charitable reminder trust) allows you to sell the asset (stocks, real estate, etc), pay no capital gains tax, reinvest the proceeds for higher income, and receive that income. How much income can you receive? As long as the calculations indicate that 10% of the balance will remain for charity, the income and the original capital can all be paid out over time to Mom and Dad or to junior. Using this method, the parents don't need to cut into their regular cash flow in order to help their child.
If you would like to turn an asset into income, please call or set a time to meet and we can show you how this works and supply you with articles describing the trust in detail.