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Now Serving 7.62 |
Receiving a inheritance from my father and want to get some good advice about maximizing the amount and giving less to the govt in form of taxes legally. Have two daughters that already have individual college accounts in a State of Tennessee program. Father wishes to put $20,000 (total of $40,000) into each of their college accounts and a decent chunk (at least to us) to me, wife, kids. I believe he can write us checks for one time gifts for $15,000 each (total of $60,000) and we can each put those into the bank without having to pay taxes on those amounts. My question is if we put the aforementioned amount ($40,000) straight into their college accounts, would that run us over the one time gift amount of $15,000 each causing us to have to then pay taxes? I know nothing about this and want to do it legally obviously and to maximize the take. Thanks in advance. | ||
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Told cops where to go for over 29 years… |
Recently went through this with my father. On gifted funds, the recipient doesn’t pay any tax regardless of amount. The giver is responsible for paying the tax (I’m sure there are some exceptions of course) The standard annual max of $15K is PER RECIPIENT before any gift tax would be potentially due. So as long as the checks are written to you, wife and children separately $60K combined would not incur any tax burden. Not entirely sure by your post if your father has passed away or is still with you, but if he still alive he can give each year to $15K per recipient exclusion amount. If you father is alive and married, he and his wife can each give $15K per recipient, doubling the total (for 4 recipients) gifted funds to $120K annually before any possible burden or reporting requirements. Here is the good news, he can actually give in excess of the $15K exclusion amount and still not be liable for gift taxes. In addition to annual exclusion, there is a lifetime exclusion and any gift in excess of an annual exclusion can be applied to the lifetime exclusion (currently $11.7 million) no tax burden until that amount is exceeded. I think there are some special rules reducing tax burden for money gifted for education expenses, but essentially irrelevant unless there is a lot more money involved. Dad needs to file a form 709 for any year he makes a reportable gift (gift exceeding annual exclusion amount). The 709 is not an attachment to his income tax filing, it is a separate stand alone form. I don’t know if TN (or any state) taxes gifted money, if so I can’t help with that. https://www.irs.gov/businesses...stions-on-gift-taxes https://www.irs.gov/pub/irs-pdf/i709.pdf What part of "...Shall not be infringed" don't you understand???  | |||
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eh-TEE-oh-clez |
Gift and Inheritance Tax is assessed to the Giver, not the Recipient. You pay no taxes on money received as a gift or inheritance, whether received during the Giver's lifetime or after his death. Each year, under the current law, the Giver gets a gift tax exclusion amount, meaning an amount you can give that is excluded from the gift tax calculation. For 2021, it's $15k per Recipient. Amounts over the exclusion amount are applied against a lifetime exemption amount. For 2021, that exemption is $11.7 million. When you die, whatever is left of your exemption amount is applied to your estate. The $11.7 million exemption amount changes from year to year, often by many millions of dollars. Don't always count on this exemption amount to be high enough at the time of your death to allow you to pass your assets on to loved ones tax free. It is a frequent target of liberal tax reform. | |||
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Shall Not Be Infringed |
You (and your Father) really need to speak with a professional one this one. That said, though I'm NOT a professional, did Administrate my Father's Estate, and I do know that if your Father is still alive and writing checks, it would NOT be considered an inheritance.  Regardless, any funds transferred from your Father would be gifted and he would be taxed as addressed by '911Boss' and 'Aeteocles' in the previous post(s). ____________________________________________________________ If Some is Good, and More is Better.....then Too Much, is Just Enough !! Trump 2024....Save America! "May Almighty God bless the United States of America" - parabellum 7/26/20 Live Free or Die! | |||
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| Just because you can, doesn't mean you should |
I agree, at least pay a CPA for an hour of their time and get accurate answers. Maybe a lawyer that handles wills and estates too. The Fed's don't tax an inheritance (right now anyway) unless it's a big one, something like $11 million plus. Unless you are concerned that the money can get sucked up by health care and other expenses, you may be better off collecting it after he passes. That is a legitimate concern. Here is a site with some brief answers but get some real professional advise. https://www.nerdwallet.com/blo...xes/inheritance-tax/ ___________________________ Avoid buying ChiCom/CCP products whenever possible. | |||
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| Savor the limelight |
Going over the annual exclusion amount won’t automatically trigger gift taxes. He can use his Unified Tax Credit against gift taxes during his life or estate taxes after he has passed to give up to 11.7 million dollars to whomever he wishes. He will have to file a gift tax return. | |||
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| Now Serving 7.62 |
Dad is still kicking and 6 months into a new marriage. He sold his house recently and wanted to leave some (inheritance-for lack of a better word) while he can. | |||
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| Member |
The yearly gift tax exclusion has been covered by previous posts. For the Education funds your father can set up a 529 Plan with any personal finance advisor. Just stay away from banks as their fees are usually sky high. I believe $75000 yearly is gift tax free. Your father will make the contribution, not you. or TN has a plan https://tnstars.treasury.tn.gov/ __________________________________________________ If you can't dazzle them with brilliance, baffle them with bullshit! Sigs Owned - A Bunch | |||
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| Told cops where to go for over 29 years… |
Glad to hear! Assuming his bride is on-board with his wishes, that effectively doubles what can be gifted without exceeding annual exclusion amounts and therefore no requirement for filing a 709. Even if it “his” money she is giving you. I lost my Dad almost a year ago. He had lived with us for the last 18 months. He decided he wanted my brother and I to receive our gifts while he was still with us. What part of "...Shall not be infringed" don't you understand??? | |||
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| Now Serving 7.62 |
That is the plan I opened for both girls and he gives monthly directly to those State of TN 529 plans so the idea was to send those amounts to their accounts. | |||
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| Now Serving 7.62 |
I don’t look forward to that day but you never know when it’ll happen. Sorry for your loss 911Boss. Lost my mom in 2018 to strokes and dementia. After her strokes we had to put her in a nursing home and dad was there by her side every day for 2 years until the day she passed. Two years after that he met his current wife who happened to be his first love in 8th grade. I don’t know how long he would have lasted had they not met. | |||
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| Now Serving 7.62 |
I want to say thank you for all that shared their knowledge and advice. It’s been well received. | |||
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goodheart |
Regarding 529 plans, please check with a CPA or financial advisor regarding the ownership of the plan. I was told recently that I could set up 529 plans for the benefit of our granddaughters but you know her name. After they go through the financial application process for college then the plan can be signed over to the grandchildren. Otherwise they might not qualify for financial aid. _________________________ “ What all the wise men promised has not happened, and what all the damned fools said would happen has come to pass.”— Lord Melbourne | |||
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| goodheart |
_________________________ “ What all the wise men promised has not happened, and what all the damned fools said would happen has come to pass.”— Lord Melbourne | |||
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| Now Serving 7.62 |
I had not thought of that. I set them up but had not thought about ownership and the application for financial aid. Many thanks. Still gleaning wisdom from the wise. | |||
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| Member |
If your father has the cash on hand could the both of you open a joint bank account with the amounts he wishes to pass on. When he passes the account simply becomes your and you can deposit the money into kids accounts. | |||
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| That rug really tied the room together.  |
I bet if he handed you a briefcase with $250,000 cash in it , no one would get taxed ... ______________________________________________________ Often times a very small man can cast a very large shadow | |||
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| eh-TEE-oh-clez |
Undocumented cash is harder to spend than clean money sitting in a bank account. If the IRS gives you a way to transfer money tax free ($15k gift tax exclusion) then the smart move is to paper trail the maximum amount transferable without penalty. Later if you wanted to use the money as a down payment on a rental property, you don't have to season the money in your account. | |||
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member |
N.B., this very well may have changed since my father passed in 2001. On death, an estate has an exclusion that may be subtracted from the estate prior to calculating taxes on the estate. Any gifts given prior to death are subtracted from this exclusion. IOW, the exclusion is a one time thing that can be used prior to or after death, but the total exclusion amount remains the same whenever it is used. When in doubt, mumble | |||
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| Member |
But , it can be done . The problem is that people get stupid and start living a lifestyle that draws attention . | |||
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SIGforum.com Main Page The Lounge Have a question for tax, finance, accountant experts if possible regarding receiving inheritance if anyone cares to answer a couple questions.
Main Page The Lounge Have a question for tax, finance, accountant experts if possible regarding receiving inheritance if anyone cares to answer a couple questions.© SIGforum 2024