My brother just told me he's having a baby. It's only two siblings in our family, so brother and I are extremely close. He's 30 and I'm 32. Baby was unplanned. It's the first baby in the family so it's been 30 years and none of us know how best to set up a baby financially. Him and his wife currently make a combined $115k with essentially no debt, they own their house too and rent part of it so their mortgage payment is about $1.5k. House current market value is about $400k. They are young and career prospects look good. HCOL area.

I, on the other hand, will clear $200k+/yr between my W2 and rental income. My expenses are minimal, since my mortgages are paid by my rentals. Houses market value $1.2M. Like brother, my debt aside from mortgages is also minimal.

Since I have more disposable income, and since I don't have kids of my own yet, what are some ways I could help support my brother and his future baby without becoming an enmeshed aunt? One thing I thought of was to make a big contribution (maybe $5k?) to start off the baby's 529, and then somewhat semi-regular payments afterwards (like on Christmas or birthdays.)

Also to be clear, my brother is not asking for anything- nor am i meddling into him and his wife's finances or decisions (the numbers i know are simply from previous conversations.) I'd just like to help since I'm doing a little better moneywise and don't have my kids of my own yet.

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grinch1225 t1_iyepkgw wrote on November 30, 2022 at 9:03 PM

I’d recommend you look into UTMA and UGMA accounts. The funds can be used for anything, some of the accounts will let you hold real property, and you can set this up as a custodian and hand the account off at 18/21/25 or whatever the age of majority is in your state.

529 are great, locking funds in an education account could restrict its use in the future would be my only “you should know” type inclusion.

nolesrule t1_iyeto0z wrote on November 30, 2022 at 9:29 PM

I don't know if I'm reading this the way you intended but funds in UTMA and UGMA accounts can't be used to pay for the regular expenses of caring for a child. Rather they can be used for enriching expenses.

grinch1225 t1_iyetsm5 wrote on November 30, 2022 at 9:30 PM

I was stating that the funds could be given/used by said minor at a future date, sorry if I was unclear about that!

debbiewith2 t1_iyf68t9 wrote on November 30, 2022 at 10:56 PM

must be handed over, no strings, no oversight

Bright-Entrepreneur t1_iyeqw1e wrote on November 30, 2022 at 9:11 PM

529 is a good option. It takes arguably ~$500 per month from birth through completion of college to fully fund a 529 with realistic expected returns. And that’s per kid.

So for sure 529 is a great option and definitely contribute to that. I have a 4 year old and a 2 year old and trust me I wish my relatives would all stop buying tons of toys my kid doesn’t need and just buy a cheap token toy they’re happy with and contribute rest to college fund. That’s what my brother and I do for each others’ kids. I buy a simple $20 toy my niece loves then stuff another $80 in the 529.

Not sure what state you’re in or they’re in, but I’m in Texas and so there’s no benefit to using a Texas specific plan here. As such I use the Utah plan my529.org which allows “gift links” that are easily usable for donating to someone else’s 529 plan. That way parents maintain control if that’s how you want it. Alternatively, you can set up a plan directly in the kids’ name.

Also, offer to pitch in for the nursery costs or just buy big ticket items on gift registry. The costs of setting up nursery + car seat + stroller + car seat bases + hospital bill + diapers + formula if/when it’s needed is…a lot. Our hospital bill was ~$7k per kid to bring them home, for example.

Beyond that, when the kid is old enough to have earned income (Eg 18-25), you could have kid set up Roth IRA and contribute to it and have discussions with kid about retirement planning and importance of saving early and offer to contribute more to Roth IRA after graduation if they continue to meet 401k savings targets for X% over Y years in order to give them a boost to saving for retirement.

Big ticket items like car at age 16 or paying for kids weddings or helping with down payment on a house are pretty impossibly expensive. But honestly 529 is best place to start