Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Hi, I'm.....
Old 01-23-2007, 08:52 AM   #1
Confused about dryer sheets
 
Join Date: Jan 2007
Posts: 1
Hi, I'm.....

Long time lurker, first time posting.......been reading/learning on this site for months now. I'm 45, divorced, good job with large company,good salary and benfits. Definately a LBYM kind of guy, saving/investing a large percent of my take home for ER. Up until recently, I had planned ER in 2017 at 55 when all my planets seem to line up, bills paid off, pension, and enough money saved (according to firecalc and all other retirement calculator I can find).

Here is where I need some help...I recently found out that I will soon (when an elderly, sick relative dies) recieve a large inheritance. Somewhere north of $500,000. When that happens, that's it, I'm done- ER.

This money is willed to go to my father, who is independently wealthy and already retired. He says he does not need the money and is going to give it to me.

My question is this- If this were to happen now, I can see where he can get the money without paying estate taxes on it, but how can he then give it to me while he is still alive? Is he mistaken that he can just pass it on to me without being taxed? Would the will need to be changed to reflect me as the beneficiary instead of him?

Any and all comments/thoughts appreciated.

__________________

__________________
FL_Sailor is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Hi, I'm.....
Old 01-23-2007, 09:06 AM   #2
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 347
Re: Hi, I'm.....

Currently each individual is allowed to gift up to $1,000,000 in a lifetime without paying gift taxes. They get an exemption of $1,000,000. It does however count towards the total estate when that person dies. In other words at present, the estate tax exemption is something like $2,000,000 for an individual. If that individual gives you $1,000,000 as a gift and has a remaining estate of $1,500,000. The estate is taxed on any amount above $1,000,000 of the $1,500,000 estate.
This is all subject to change when the present tax cuts from 2002 expire or sunset. Then again now that the Dems are back in charge I'd say all bets are off. I'm sure the'll want to "tweak" the tax code.

Anyone feel free to jump in here if I don't have this down correctly.
__________________

__________________
USCG regulations say you have to go out. They don't say anything about coming back.
USK Coastie is offline   Reply With Quote
Re: Hi, I'm.....
Old 01-23-2007, 09:10 AM   #3
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,563
Re: Hi, I'm.....

Welcome to the board, Sailor.
Quote:
Originally Posted by FL_Sailor
When that happens, that's it, I'm done- ER.
This money is willed to go to my father, who is independently wealthy and already retired. He says he does not need the money and is going to give it to me.
My question is this- If this were to happen now, I can see where he can get the money without paying estate taxes on it, but how can he then give it to me while he is still alive? Is he mistaken that he can just pass it on to me without being taxed? Would the will need to be changed to reflect me as the beneficiary instead of him?
I'm sorry that this is what's accelerating your ER, but congratulations on getting there ahead of schedule!

Your father has a few options: disclaimers, gifts, and busting the gift tax exclusion.

If the will is written to include a disclaimer, it means that your father could elect to refuse the will's bequest. At that point the will's disclaimer will direct the money to someone else, presumably you. Of course that depends on your father's confidence that you're next in line instead of the Hawaii Humane Society. This is the method by which my brother & I inherited a small portfolio from our grandfather-- after our father disclaimed it.

A second option would be gifting. Your father could gift you up to $12K/year, raised by an inflation boost in $1000 increments, tax free. Of course for a $500K bequest this might take a long time to pass on.

A third option would be a lump-sum gift from him to you, which would wipe out a large chunk of his estate-tax exemption. There'd be IRS paperwork involved but the gift would be free of tax.

If this inheritance includes an IRA then be very careful with how your title the IRA. It means the difference between your being able to spread the withdrawals out over your life expectancy or having to withdraw the entire amount within five years. The nitty gritty details are in Ed Slott's first book.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Hi, I'm.....
Old 01-23-2007, 09:13 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 15,890
Re: Hi, I'm.....

Welcome, sailor. I think this is a question that you really need to discuss with your dad and a competent estate attorney.

I would also suggest that you revisit your plans for ER and make sure you have the other aspects of your plan up to date.
__________________
"Neither my companion or I carry firearms on our persons. We depend on the goodwill of our fellow man and the forbearance of reptiles."


- English Bob
brewer12345 is offline   Reply With Quote
Re: Hi, I'm.....
Old 01-23-2007, 09:58 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Re: Hi, I'm.....

See an estate planning attorney ASAP. If the person who is sick is still of "right mind", they may be able to set up trusts and things so the money flows to the right party at death.

Good luck.................
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Re: Hi, I'm.....
Old 01-23-2007, 11:15 AM   #6
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,211
Re: Hi, I'm.....

Just for the purpose of emphasis if nothing else, I join in the recommendation for you and your father to consult an estate planner. As posters have mentioned, there may be a variety of ways to accomplish what you want. Do this ASAP.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: Hi, I'm.....
Old 02-01-2007, 03:18 PM   #7
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
Re: Hi, I'm.....

or, if your relative is coherent and your family is open about such matters, your dad could talk to that person and have your name replaced for his.

ps, if you ever require crew i happen to have nothing on my schedule.
__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Re: Hi, I'm.....
Old 02-01-2007, 06:41 PM   #8
Thinks s/he gets paid by the post
Helen's Avatar
 
Join Date: Oct 2004
Location: Portland
Posts: 1,289
Re: Hi, I'm.....

Wow, it would really be tough to have this converation with a sick, elderly relative. I don't know if I would go there.

Even though it might make all the sense in the world to do financially, emotionally it could be mmmmm, I don't know which word to use.
__________________
Helen is offline   Reply With Quote
Re: Hi, I'm.....
Old 02-01-2007, 06:48 PM   #9
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,211
Re: Hi, I'm.....

Quote:
Originally Posted by Helen
Wow, it would really be tough to have this converation with a sick, elderly relative. I don't know if I would go there.

Even though it might make all the sense in the world to do financially, emotionally it could be mmmmm, I don't know which word to use.
Unseemly?
__________________

__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 05:54 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.