By Quentin Fottrell, MarketWatch
I married a woman 30 years ago. She was a divorcée with a 6-year-old child. She divorced me about 10 years ago, after 20 years of marriage. I raised her daughter by providing clothing, food, shelter, braces and college, because her biological dad was a deadbeat loser, and still is.
I had two more children with my wife. Currently, I give all three children equal gifts of $10,000 per year. (I’m in the 1%.) I never really cared for my stepdaughter and, to this day, I find her personality abrasive.
But I remember very well when my father died: His will heavily favored my oldest sister. I came from a family of eight children, and our father’s last will and testament caused havoc and distrust among us siblings and broke some of us apart. I don’t think my father had any idea of the destruction that he would leave behind. I don’t want my two children fighting with their half-sister.
But I really have to work up my inner strength to gift her equally. I want to distribute $100,000 each per child every year. I can easily afford it, but I just don’t care for my stepdaughter. Half the time, I feel like she befriends me just so she can get a payout. I want to do the right thing, but it’s hard.
So I’m reaching out to you for advice and ideas.
Mr. Not-So-Perfect Parent
Dear Mr. Not-So-Perfect Parent,
Like a store full of Waterford Crystal, I want to get in and out of this world without breaking anything.
You fed and clothed your stepdaughter and read her bedtime stories. You saw her graduate from high school. You watched her mature into a woman. You listened to her problems, and probably gave her boyfriends the once-over when they came to your home. You took deep breaths when you lost patience with her, and you felt joy when she came home with news that she made the debate team or when she happily waved the results of a school exam that she had dreaded but worked hard for.
From the age of 6, she knew you as her de facto dad. She could have the same eyes or smile (or temper) as the woman you fell in love with. When you and your ex-wife married, you promised to raise her daughter together. Whether you wanted to be or not, you were the father figure she saw across the breakfast table. You were a constant in her life. You led by example. “Mr. Not-So-Perfect Parent” tells me all I need to know. You were her parent then and, yes, you remain her parent now.
Given that your relationship was not perfect — who has a perfect relationship with their parents? — it can’t have been easy for you raising your wife’s child, especially if you didn’t feel as close to her as your did to your biological children. There was a distance between you two that you couldn’t quite put your finger on, or maybe neither of you fully knew how you felt about the other. She was both an imperfect stepdaughter and an imperfect daughter. You had the best of both worlds.
If you are concerned about your stepdaughter’s maturity and ability to handle such a large sum of money, you have several choices: You can reduce the annual amount for all three children, or you could divide the $100,000 into installments throughout the year and/or deposit some or all of the money in a trust for your children with the requirement that it must be used for education, career advancement, and their children’s education or housing.
On a separate financial note, you will also have tax issues to take into consideration: These annual gifts will count against your unified credit against gift and estate taxes. The unified federal estate and gift tax exemption for 2019 is $11.4 million, or effectively $22.8 million for married couples, which is a record high. These rules may also change, depending on the winds of political change. You will, of course, have to file gift-tax returns.
Your stepdaughter may not have always felt on an equal footing with her siblings. She loved you sometimes. She resented you other times. She wished her own father could have been there. When and how was the trust lost between you? She doesn’t know. I’m not trying to stranger-splain your own history with your stepdaughter, but many parents who have felt taken for granted by their child or children who have suspected their parent of favoritism might identify with these feelings.
If you give two of your children $100,000 a year or $1,000 a year or even $100 a year, and you pointedly leave your stepdaughter out, I believe you risk causing her irrevocable, incalculable damage. If you believe she is abrasive after including her in this annual gift with your two biological children, you will still have done the right thing. If it builds and/or restores trust in your father-daughter relationship, all the better. The worst thing you could do is make this relationship transactional.
Leave the Waterford Crystal intact, and make sure your daughter always knows that she belongs.
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