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Tax Free GIFT to Son to transfer $$ now
Old 11-15-2013, 12:29 AM   #1
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Tax Free GIFT to Son to transfer $$ now

Anyone know the rules for giving a child (my son is 15) $$ tax free? I'd like to start transferring money to him in an account now that he can use later in life (for a house, trip, wedding, etc).

I think the limit is $28,000 annually, but I'm not sure if I need to do something specific to note it on the tax return. Also, I'm not sure what the cut-off date is (i.e. 12/31/13 or 4/15/14).

Any other issues I'm missing, please give me your thoughts. I'd like to gift the max to him for the next 10 years. I also need to do some estate planning soon, I need to make it a priority. Thanks,
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Old 11-15-2013, 01:50 AM   #2
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IRS Raises Yearly Limit For Tax-Free Gifts - Forbes
Each calendar year, you can give the annual exclusion, which increased in 2013 to $14,000. Your wife can also give $14,000.
Don't think you need to note anything on tax return as long as not over the exclusion amount.
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Old 11-15-2013, 06:40 AM   #3
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You need to use form 709 if you give above 14k per person talk to your tax man. If you are worth less than 5 million you could use up some of that with a large gift and filing form 709. But please talk to you tax man before you do anything. A mistake can cost big$ in this area. No taxes are due if you are worth under 5 million and file the right forms on time.
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Old 11-15-2013, 07:03 AM   #4
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I would not gift such significant $ to a 15 year old. Once you gift it to him you totally lose control of it and once he is 18 he can use it any way he wishes. He may be a very responsible kid and do with it what you intend, but he could go off the rails at some point and use this money to fund some destructive behavior that ruins his life forever. You never know what will happen and you don't want your money funding some arrogant, rich, brat lifestyle.

Please recognize that my intent is not to malign your son but only alert you to the potential perils of young folks having unfettered access to large sums of money.

If you are doing this for estate planning purposes, see an estate planning attorney and look into funding a trust.
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Old 11-15-2013, 07:09 AM   #5
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To just clarify what the others have already correctly stated, you and your spouse can each give up to the amount of the annual gift tax exclusion ($14k this year) without any tax. However, if you do this "split" gift where you both give your son $14k in one year, I'm pretty sure you'll need to complete the gift tax return rec7 is referring to... In other words, anytime you give more than $14k in total. It doesn't mean you'll be subject to any gift tax since the lifetime limit is over $5 million. The gift tax form simply provides for tracking of lifetime gifts that exceed the annual exclusion so you are eventually taxed if you hit the lifetime limit. I think I said that right... It's pretty early in the day- I'm going to get more coffee.
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Old 11-15-2013, 10:55 AM   #6
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If we die our money goes into a trust to be used for our kids support, and then lump sums get doled out at various ages. I don't remember the exact numbers we put in, but I don't think they get all of until they are at least in their thirties.

If they have high assets in their own names at younger ages it counts against them for financial aid planning.
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Old 11-15-2013, 11:37 AM   #7
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Quote:
Originally Posted by panacea View Post
To just clarify what the others have already correctly stated, you and your spouse can each give up to the amount of the annual gift tax exclusion ($14k this year) without any tax. However, if you do this "split" gift where you both give your son $14k in one year, I'm pretty sure you'll need to complete the gift tax return rec7 is referring to... In other words, anytime you give more than $14k in total. It doesn't mean you'll be subject to any gift tax since the lifetime limit is over $5 million. The gift tax form simply provides for tracking of lifetime gifts that exceed the annual exclusion so you are eventually taxed if you hit the lifetime limit. I think I said that right... It's pretty early in the day- I'm going to get more coffee.
If one of you gives $28,000 to your son, then you need to file the Form 709 to elect to split the gifts between you and your spouse. But if you each give $14,000, no need to file the 709.
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Old 11-15-2013, 11:42 AM   #8
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Be aware that giving these gifts will have an effect on his FAFSA. Money owned by the child counts more than money owned by the parent in determining need.
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Old 11-15-2013, 12:13 PM   #9
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Originally Posted by pb4uski View Post
I would not gift such significant $ to a 15 year old. Once you gift it to him you totally lose control of it and once he is 18 he can use it any way he wishes. He may be a very responsible kid and do with it what you intend, but he could go off the rails at some point and use this money to fund some destructive behavior that ruins his life forever. You never know what will happen and you don't want your money funding some arrogant, rich, brat lifestyle.

Please recognize that my intent is not to malign your son but only alert you to the potential perils of young folks having unfettered access to large sums of money.

If you are doing this for estate planning purposes, see an estate planning attorney and look into funding a trust.
+1 - if he has access to that money at 18, it is hard to imagine him being willing to save it for house, wedding, etc.
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Old 11-15-2013, 12:23 PM   #10
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Most filial children are the ones who are still waiting to inherit money from their parents. Keep the money as your leverage.
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Old 11-15-2013, 01:19 PM   #11
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Originally Posted by RetiringAt55 View Post
Be aware that giving these gifts will have an effect on his FAFSA. Money owned by the child counts more than money owned by the parent in determining need.
+1 I closed my daughter's custodian account at Schwab(UGMA) as it would go against any aid/scholarship she may otherwise qualify.
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