The Sneaky Ways Parents Transfer Money to Their Children
10th February 2025
Although it may not look like it when you walk into your artist friend’s Cobble Hill brownstone, there are limits to how much a parent can bestow on their child. Designed to thwart the wealthy’s attempts to circumvent the estate tax, which after death gobbles up to 40 percent of one’s assets over $13.99 million, the IRS’s “gift tax” stipulates that each taxpayer can give only $19,000 per year to any individual, including their kids. Any more than that and a parent must file Form 709, which alerts the IRS that the giver is eating into the lifetime maximum (which is also $13.99 million) they can grant to one person tax free. Yet rich parents often want to give more. Here are the (sometimes barely legal) ways they get it done.
Whenever the statists of the world find a program that goes against basic human nature (prohibition, drug laws, inheritance taxes), people will make or find a way to get around it. As there are more non-statists than statists in the world, guess who eventually wins?
The problem is, when governments enact stupid laws that almost everyone tries to get around (or just ignore), it undermines the socially-inculcated respect for law that supports such things as the aversion to murder, rape, arson, robbery, etc. This is not good. Prohibition gave us organized crime. Drug laws gave us murderously violant drug cartels. Inheritance (and gift) taxation gave us a vast army of accountants and lawyers that arguably contribute very little to actual human progress.
When I was in law school taking a class on basic tax law, our professor came in the first day carrying a stack of paper about two feet tall. He put it on his desk and said, “This is the Internal Revenue Code. It runs about then thousand pages.” He picked up the top sheet and showed it to us. “This tells you what tax you have to pay.” He put that on the desk and put his hand on the rest of the stack. “This tells you how to get around paying that tax.” He patted the stack and said, “This is what we teach here.” And that about sums it up.