Question about gifting strategy

[audreyh1]

Thanks all for the good and interesting responses. I'm actually nowhere near the exclusion limit either. But I am envisioning a future where the money-grubbing pols in Washington lower the exclusion back down to where I could be affected.

Well the estate tax exemption will be cut in half anyway by 2026, and there is grumbling about reducing it even further.

So, no, you can count count on the estate tax exemption to remain as high as it is today.

 

[SecondCor521]

Another thing to think about for some people is that the gift and estate tax is a unified tax credit.

What this means approximately is that a person's estate might owe an estate tax if (a) the gifts during life that are above the annual $15K exclusion and reported on a gift tax return plus (b) the value of the person's estate at death (c) exceed the exclusion amount at the time of death.

So if you give $215K to your kid for a house down payment (could easily happen with a well off parent and a kid buying in SFO) and report a $200K gift on a gift tax return, then you die 15 years later with an estate of $6M and the exclusion amount then is $6.1M, then I believe your estate would owe taxes on $200K + $6M - $6.1M = $100K. Currently the top estate tax rate is 40% and the way the math works I think that applies to the first taxable dollar, so that would be a $40K estate tax bill due.

 

[euro]

I struggled with ways to avoid reporting a gift to my son so he and DIL could buy a house.
I finally said, "The heck with it", and filed a form 709. I also had to send a gift letter to the lender.
With the exclusion being $11.7 mil, the $235K is down in the noise.

I did the same with gifts to both my children. Just file the form - it's not a big deal.
I don't understand why so many people seem to twist themselves into a pretzel just to avoid filing this simple form (no taxes are due in all but the VERY most extreme cases). To the OP: just give the 100k to your daughter (best to do that ASAP, so that it can properly season in her account), file form 709 next April, and be done with it.

 

[GravitySucks]

I think OPs idea will work fine. I would not try to circumvent to rules as that's what usually seems to draw attention.

Also, if I'm lucky enough to have my estate fall into a taxed bracket I'm coming back to haunt any heir that complains about paying taxes due. Money wouldn't even be there without a functional government.

 

[Winemaker]

I have bought and sold real estate for shelter and as rental property for over 38 years. I have had to sign many documents to state that none of the money used was given to my wife and I before the purchase. I have had to also verify zillions of cash and check deposits (rent payments) into my checking accounts over the years, prior to qualifying for a mortgage.

My advice, let her buy the property own her own, then gift her after all the t's are crossed.