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Gifting to Family Members
Old 04-06-2013, 11:40 AM   #1
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Gifting to Family Members

I am thinking about Gifting some $$ (up to the $13K max) to Family members, on the theory that it is probably needed now by them more than later when I'm gone, plus it will reduce the estate taxes.

I have a small family & unfortunately never had children, so it would be for my brother, niece & nephew.

My concerns or thoughts are:

1. how will it affect our relationship & how to keep it as neutral as possible.
2. should the $$ have any strings attached or not?

Since they are down to earth playful folk, I had thought maybe asking them what they plan to do with the $$ and see what actually happens.
My DH feels it should be more "no strings" although I certainly would not hold anyones feet to the flame so to speak.

Any thoughts/experiences on this?
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Old 04-06-2013, 11:41 AM   #2
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Gifts with strings are not gifts.
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Old 04-06-2013, 12:21 PM   #3
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I would not ask their plans. In some cases you may be able to figure out what they did with it (new car, cruise, college, or perhaps even saved for their own FIRE).

If you have concerns a gift may prompt the recipient to overspend, you might consider making the funds somewhat less accessible, such as in the form of a 529 College Savings Plan, savings bonds, etc.
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Old 04-06-2013, 12:38 PM   #4
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I agree, no strings. Otherwise I'd think it would affect your relationship. A 529 plan, if appropriate, is a good idea too. Or you could offer to fund their Roth IRA if they aren't able to do that on their own.

You could start with a smaller amount this year and see how it goes. The problem you'll have then is if one relative blows it, and the others use it wisely. Then the next year, do you leave that person out while gifting to the others?

The first $5.25M of your estate is not taxed, so if you have less than that, there is no estate tax to reduce.
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Old 04-06-2013, 12:54 PM   #5
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No strings vote. My Mom was famous for having strings and plans attached and it made anything she gave much more difficult to be grateful for. As far as how to give and avoid change of relationship how about robbing some community chest cards from an old Monopoly game? "Your real estate tycoon aunt sold her apartments!"
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Old 04-06-2013, 12:59 PM   #6
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Each family is different. But I think that people in my family might be somewhat offended to receive an unsolicited gift of money. It would mean that I see them needing financial help and that would hurt their pride (even if they did need the help). That would be less of a problem if the gift was directed to someone much younger like a niece or a nephew. But gifting money to someone my age or older, like my sister or parents, would not go over too well. In my family, inviting people to a shared experience is much better received. I would be OK to invite my sister and her family on a vacation, all costs paid by me. Or invite my parents to a nice restaurant.

In any case, I think there should be no string attached.
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Old 04-06-2013, 01:06 PM   #7
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A suggestion:

Don't give them the max of $13k, since they might think "oh, if Aunt Landlady is giving us the max this year, there's a good chance there'll be more of this coming down the pike", and might artificially influence their behavior (either good or encourage them to be even more wasteful with the money).

Give them $10k each, no strings attached. See what they do with it. Then ask yourself if you will feel comfortable giving them more money, based on how they used it.
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Old 04-06-2013, 01:18 PM   #8
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Strings and expectations can get in the way of otherwise loving family relationships. I would be very careful with that, but you know your own family much better than I. Have you considered offering a family (extended family, include brother's family) vacation that you exclusively pay for. Then they are not accepting money from you, but are making time to participate in your event.

If the Niece and Nephew are an age where future college expenses might be an issue, setting up a 529 or contributing to an existing 529 is one exception to that "strings" observation as most families will absorb educational gifts to children without affecting other family dynamics too much.
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Old 04-06-2013, 01:25 PM   #9
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The annual maximum was increased to $14K in 2013.
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Old 04-06-2013, 01:55 PM   #10
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I am available for adoption.

Just kidding.

I agree with no strings or questions. That could change the dynamic between gifter and giftee.

An idea..if these relatives have car/home loans or pay rent, and you truly want to use your gift for a specific reason without debates, make a few payments on their loans or rent payments in advance.
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Old 04-06-2013, 01:59 PM   #11
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The first $5.25M of your estate is not taxed, so if you have less than that, there is no estate tax to reduce.[/QUOTE]

Unless the OP lives in one of the 14 states with estate tax exemption ranging from 400K in Ohio up to 3.5M in Illinois.
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Old 04-06-2013, 02:19 PM   #12
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Not applicable to the OP situation, but a word about the law and any situation that might involve some government benefits such as medicaid.

In most states, there is a 5 year lookback period, where certain expenditures within that period would be considered as assets prior to receiving aid. ie. Nursing Homes.

In other words, an elderly parent may not "give away" assets, in order to receive government benefits.

Example: An elderly person with $100,000 in assets who chose to give it away in order to fall under the Medicaid limit, and thus have nursing home care paid for by the "state"... would be ineligible if the "gift" was made within the 5 year limit.
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Old 04-06-2013, 02:39 PM   #13
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We gift a lot to family. No strings, although we hope they have some fun with it.

It hasn't changed the relationship (mostly siblings). At first family members were a bit bewildered by cash gifts, but gradually got used to the idea that we had some "extra" we wanted to share with them. We've been retired for a long while, and they are still working, so it's no surprise to them that we have a little "extra".

All our beneficiaries are hard-working folks who have never looked for a handout. If we had a "problem" relative, we would probably approach things very differently.

We feel very strongly about giving sooner rather than later (i.e. posthumously).
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Old 04-06-2013, 02:44 PM   #14
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I can't imaging how it wouldn't change your relationship with a sibling. If it were me I'd keep it to the generation below. That is a gift to the sibling in a sense.
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Old 04-06-2013, 03:38 PM   #15
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Quote:
Unless the OP lives in one of the 14 states with estate tax exemption ranging from 400K in Ohio up to 3.5M in Illinois.
Good news for Ohio individuals (bad new for municipalities who depended on it), the Ohio estate tax is no longer in effect as of Jan 1 of this year!
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Old 04-06-2013, 03:42 PM   #16
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Originally Posted by NW Landlady View Post
I am thinking about Gifting some $$ (up to the $13K max) to Family members, on the theory that it is probably needed now by them more than later when I'm gone, plus it will reduce the estate taxes.
To add more to the discussion, your husband can also contribute the same amount to each family member. So, in essence you can give $28K in total to each person.
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Old 04-06-2013, 03:48 PM   #17
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After my mother died and I received my inheritance, DW and I gifted to each of our adult children (my mother's grandchildren) the annual maximum X 2. I told our adult children that the gifts were from their grandmother and to not expect any more until DW and I both died.

I don't know what our children did with the money. We haven't talked about it. They have not spent the money in any obvious way. I suppose they salted it away at Vanguard. They are even more LBYM than DW and I are.
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Old 04-06-2013, 04:00 PM   #18
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They are playful folks, eh? Engage each in a conversation "What would you do if you won $10,000 tax free on a scratch-off ticket? " Then hand each an envelope with a scratch off ticket and a check in it.
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Old 04-06-2013, 04:15 PM   #19
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Wow! Thanks for all the good ideas & thoughts...No strings it is!

And I also was not thinking of starting with the full amount as a starting point.

I don't think a nice vacation beyond their usual ones would be the best use of the funds - they are northwesterners & climb mountains, bike the pacific coast & ski/snowshoe, etc.

But niece & neph are adults & I can see maybe getting their fist home, or buying something they need/want could be on the agenda.

The reason I keep my brother & his wife in the group is because they both work very hard & I don't believe they have retirement savings of significance & their house could use a few repairs. There are other issues I won't mention here - but they are good thrifty peeps that have hit a few bad bumps in the road over time and it could give them a little relief.

Anyhoo....I am planning to go visit them (out of state) in the next few weeks, so I will test the waters & see how they feel about it.
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Old 04-06-2013, 04:17 PM   #20
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Originally Posted by heeyy_joe View Post
They are playful folks, eh? Engage each in a conversation "What would you do if you won $10,000 tax free on a scratch-off ticket? " Then hand each an envelope with a scratch off ticket and a check in it.
I like this idea a lot actually!
Sort of reminds of how we convinced the neice to accept an extra car we had as a gift.....first she did not have much interest in it (maybe thought a cost to it) and then I told her what would you say if you found the yellow vw bug under the Xmas Tree?
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