My late brother’s three children say they should receive the same annual monetary gifts their grandmother gives to her other children. Are they entitled?

Dear Quentin,

My aging mother has a significant annual income. I have power of attorney for her, and have been helping to manage her estate for several years. She does not have full cognitive dementia, but she does become easily confused. 

As the person with POA, I encouraged her for the past few years to give gifts to her children and grandchildren. She gave each of her children an amount close to the annual limit and the grandchildren a lesser amount. My brother, who has been deceased for some time, left three adult children. 

This year, she decided to split what would have been my deceased brother’s gift among his children. Now they are saying they should get that in addition to what they would receive as grandchildren. I am curious as to your thoughts.

Son and POA

“What seems clear from your letter is that an act of generosity has led to a request for more money. That seems like an unfortunate response.”

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Dear Son,

There’s no right answer. Your mother’s decision and your guidance trump what other people believe is fair. What seems clear from your letter is that an act of generosity has led to a request for more money. That seems like an unfortunate response. A “thank you” would have sufficed.

You and your mother have a few options: Give X amount to her children — X being the higher sum — and Y to her grandchildren. Of course, she could choose to give X and Y to the three grandchildren whose father passed away. I am, however, sorry they have lobbied for both.

The reason there is no right answer is that this is your mother’s money, and no one has the right to dictate what she should do with it. I see no reason they should not receive only the amount that would have been given to their father if he were still alive, or both amounts. 

A separate warning: you should consult an attorney and your power-of-attorney instrument to ensure that any annual monetary gifts you give to yourself are not considered self dealing. You could end up having to prove that you were authorized to make such gifts in court. Read more here.

The annual exclusion, or the amount your mother can give a third party without using your annual gift- or estate-tax exemption, is $17,000 in 2023 for a single person or $34,000 for a married couple. Otherwise, she must file a gift-tax return with the Internal Revenue Service.

For 2023, the lifetime gift- and estate-tax exemption is $12.92 million for a single person, or $25.84 million for a married couple. Those rates will sunset at the end of 2025 if Congress doesn’t act, reverting to levels prior to the Tax Cuts and Jobs Act, which went into effect in 2018.

When your mother passes away, she could leave the inheritance she would have left to her deceased son to his three children. I suspect that would be a significantly higher amount than the money she may be planning to leave her grandchildren in her will.

Ultimately, the amount of money parents leave to their children and grandchildren depends on a variety of factors, including their relationships to the recipients and the recipients’ ages. These three adult children may not be at a point in their lives where they can handle a larger annual amount.

Would-be beneficiaries demanding that they receive more money from their grandparents’ estate can horribly backfire. No one likes to be taken for granted. I’m reminded of one gentleman who wrote to me recently about his mother’s will, and suspicions that she had cut him out of it. 

I asked him: “How would you feel if you had a child who demanded to see a copy of your will? Would it feel like your child was more concerned about money than your relationship? Like you couldn’t be trusted? Like you were a fool for including them in the first place?”

Sometimes, people create their own fate.

More from Quentin Fottrell:

I want my brother to inherit my estate. I’ve three other siblings. Do I need an attorney? What could go wrong? 

I don’t want to leave my financially irresponsible daughter my house. Is that unreasonable?

My father has dementia and ‘forgave’ my brother’s $200,000 house loan. The nursing-home notary said he was of sound mind. What can we do?

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