I gave someone older a gift since I was visiting their home. They gave me a red packet because they thought the gift was costly. It was, but that’s not the point.
If you don’t know what a red packet is, it’s a red envelope with money that’s supposed to be lucky and given to someone younger.
I accepted the red packet before knowing it was for the gift, I can’t accept money for a gift but I also can’t return a red packet because it’s very bad taste and it would be bad luck.
What do I do now?
I’d pass it on to someone younger than you. You didn’t benefit, the tradition/luck was upheld, seems like the best answer here.
Morally that makes you all squared up, although legally you still accepted it, so this advice is only good if you know you could get away with accepting money, since this sounds like you visit this guy as part of a job.