Gift Now or Inheritance Later

[Alan]

Quote:

Originally Posted by Bestwifeever You and the missus must be so happy that you are able to do this and that your son will be just a bit closer to you now, lifetime tax limits or not !

Indeed we are. Even though our daughter is delighted with what we are doing for her brother and insistent that she does not need anything from us, we will be sure that she receives an equal share in the long run. ( She earns about 4x what he does plus she has made lots of money with investment share options and the like. Plus she absolutely loves her job)

[Luck_Club]

Quote:

Originally Posted by Sojourner I would vote strongly for the lump sum. A monthly gift would quickly begin to (IMHO) corrupt their perception of their regular income and would create a sense of entitlement and dependency. Much better to give irregular, unexpected lump sums that the recipients wouldn't alter their spending habits in anticipation of. I'd highly recommend reading chapters 5 and 6 of The Millionaire Next Door, for an excellent, well-researched, objective analysis of these kinds of issues.

+1 for Lump sums

I've used large bonuses, good years, and windfalls to really stoke up the investments. With $28K gift you can seriously reduce debt, or buy a rental house. Much harder with $400 a month extra in the budget, thought it does make it easy to upgrade the car payment

[Pilot2013]

Quote:

Originally Posted by Luck_Club +1 for Lump sums I've used large bonuses, good years, and windfalls to really stoke up the investments. With $28K gift you can seriously reduce debt,

I know it may seem like a "strings attached" version, but I like the idea of reducing/eliminating debt, at least as a first step. The next "gift" can be used for fun trips, down payments, etc. assuming debt has not re-emerged. And if it has...

[Blue Collar Guy]

I just remembered this story. I think its relevant to the topic at hand so i will relate it. When i was a teenager one of my neighbors owned a business. It was actually owned by his widowed mother. This widow had 2 children who were in their 50's. The boy (my neighbor) ran one part. My neighbor had a sister, her husband ran the other part of the business. From what i remember they gave the mother(the real owner) a weekly salary and she lived very well. The widow never stepped foot into the business as it was started by her late husband. The wife of my neighbor disliked her mother in law immensely. I believe the reason was because the mom still controlled the business on paper. She convinced the mother after years of badgering to give the business to the 2 children. I met the sister and brother in law many times., nice people, no children. My neighbor had 4 children. About 5 years after she gifts the business to them, the sister dies. The husband gets remarried a few years later and suffers a massive heart attack and dies. The widow mother is still alive as well as my neighbor. They inherit as a 50 % partner the new wife who no one knows. The wind up was they sold off the property for big bucks and the business folded. The widow mother long ago (8 years) gave her kids their inheritance early, a stranger got half of it.

[youbet]

Quote:

Originally Posted by DrRoy Gifting now would be fine if the recipients are mature and appreciative. You can also consider a charitable trust to reduce taxes.

Would you also say that leaving it as an inheritance is only OK if the recipients are mature and appreciative?

[youbet]

Quote:

Originally Posted by Alan If you gift more than the amounts Audrey mention then you have to file form 709 to have the gift set against your lifetime tax free allowance. We will have to do this filing next year as we are exceeding the $28k limit with a gift to our son to help him buy a house. https://www.irs.gov/pub/irs-pdf/i709.pdf

I believe there are cases where you must file form 709 even if your gift (as a couple) does not exceed $28k. One case is when you gift it from a joint account, such as your joint brokerage account. The form is used to document that both spouses endorse the gift.

I haven't been doing this and recently discovered the need. Perhaps someone that knows for sure can comment

[xdafly]

Quote:

Originally Posted by RockyMtn ... we should start gifting some of the estate to our children and grandchildren now ..

We just gave as a gift a downpayment of 100,000 for a 1st home to one of the kids. It results in our lifetime 5.4m "allowance" being deducted but apart from filing the IRS Form 709, no tax consequence to us or kid. Plan to continue to do more of same.

[kgtest]

I've received 2 gifts in my late 20s for about 20,000 each. That gift was a fricken godsend and in my opinion that extra psychologically push to build my own wealth.

It's an amazing thing to be able to receive that gift, even more incredible to give it IMHO. I want to be able to do that for my kids when I am still alive.

One of the gifts was when we wed, my in-laws covered up to a certain point of the wedding. We managed to elope for $10,000 wedding on the beach with our closest friends and family. We had money leftover that we used to pay down our own debt and a down-payment on a newer car.

The second gift allowed me to get a new roof for our home and put some into roth IRA. I feel like just that $30,000 although we never really saw $13,000 as we put it into Roth, helped us so much that we are in much better positions financially than most of my peers.

So if you have the opportunity to gift to kids who won't squander it could be the best thing that happened to them. Plus you will get a lot of steak dinners in return.

[Danmar]

Family experience trips are fantastic. Have done several and are planning one this September. QM2 to Europe, Paris, then a week on a barge in Burgundy. I look at it as a way to create a "portfolio of memories" that my daughter will treasure once we are gone.

[NW-Bound]

Gift now or inheritance later? A bit of both.

I have paid for my children college education that allowed them to graduate debt free, and have lots of disposal income right after graduation. I then helped them with down payment to buy their 1st home.

While I can help them more if they need it, currently I am happy to see that they are doing very well on their own. And they keep insisting that they do not need anything more. And so, I will play by ear from this point on.

Same as Danmar, I would like to fund some family vacation together. They just do not have a whole lot of time off however.

[Tree-dweller]

Question: how does the IRS know whether/if you have given x number of dollars to your child? Is this Form 709 based on the honor system? My estate isn't likely to approach the $5mm size, so it's not an issue for us, but I'm just not clear how the govt would know if you slid your kids more than 14/28k in a year.

[Blue Collar Guy]

Quote:

Originally Posted by Tree-dweller Question: how does the IRS know whether/if you have given x number of dollars to your child? Is this Form 709 based on the honor system? My estate isn't likely to approach the $5mm size, so it's not an issue for us, but I'm just not clear how the govt would know if you slid your kids more than 14/28k in a year.

All you need is a bank employee to drop a suspicious activity report on you.https://en.wikipedia.org/wiki/Suspic...ctivity_report

[Tree-dweller]

I guess anything is possible, but say a monthly check for 2 grand written from a father to a son seems unlikely to trigger a SAR, which your link suggests is used to target money laundering and other more nefarious capers. Guess it's best to stick with Grandma's cash-stuffed envelope approach ;->

Quote:

Originally Posted by Blue Collar Guy All you need is a bank employee to drop a suspicious activity report on you.https://en.wikipedia.org/wiki/Suspic...ctivity_report

[Blue Collar Guy]

Quote:

Originally Posted by Tree-dweller I guess anything is possible, but say a monthly check for 2 grand written from a father to a son seems unlikely to trigger a SAR, which your link suggests is used to target money laundering and other more nefarious capers. Guess it's best to stick with Grandma's cash-stuffed envelope approach ;->

Its no big deal to file the form. No one has any tax liabilities. Your tax person may charge you extra to file it. Im not familiar with your personal situation, but if you have a wife, then you guys can give him 28k a year with no issues and no paperwork. For that matter, if there is a grandma in the mix, you can give another 14k to her and she can re-gift it to your son, now we are at 42k, still no paperwork.

[Alan]

Quote:

Originally Posted by Tree-dweller Question: how does the IRS know whether/if you have given x number of dollars to your child? Is this Form 709 based on the honor system? My estate isn't likely to approach the $5mm size, so it's not an issue for us, but I'm just not clear how the govt would know if you slid your kids more than 14/28k in a year.

I wonder about this as well. Turbotax doesn't appear to have the form as I think it is a separate filing. The form also allows you to report gifts from previous years. Since it doesn't affect me in the long run and is easy to do myself I will file the form "just in case".

[audreyh1]

Quote:

Originally Posted by Tree-dweller Question: how does the IRS know whether/if you have given x number of dollars to your child? Is this Form 709 based on the honor system? My estate isn't likely to approach the $5mm size, so it's not an issue for us, but I'm just not clear how the govt would know if you slid your kids more than 14/28k in a year.

I don't see how they would very easily at all. It certainly wouldn't show up in a normal audit, but would require analysis of all your payments across all financial institutions in a given year.

[Amethyst]

"A stranger got half of it." You meant the second wife, right? Not "a stranger." A relative by marriage. Sounds like the others chose to ignore and disdain this new relative. Serves them right.

Quote:

Originally Posted by Blue Collar Guy The widow mother is still alive as well as my neighbor. They inherit as a 50 % partner the new wife who no one knows. The wind up was they sold off the property for big bucks and the business folded. The widow mother long ago (8 years) gave her kids their inheritance early, a stranger got half of it.

[Koolau]

Quote:

Originally Posted by Blue Collar Guy I just remembered this story. I think its relevant to the topic at hand so i will relate it. When i was a teenager one of my neighbors owned a business. It was actually owned by his widowed mother. This widow had 2 children who were in their 50's. The boy (my neighbor) ran one part. My neighbor had a sister, her husband ran the other part of the business. From what i remember they gave the mother(the real owner) a weekly salary and she lived very well. The widow never stepped foot into the business as it was started by her late husband. The wife of my neighbor disliked her mother in law immensely. I believe the reason was because the mom still controlled the business on paper. She convinced the mother after years of badgering to give the business to the 2 children. I met the sister and brother in law many times., nice people, no children. My neighbor had 4 children. About 5 years after she gifts the business to them, the sister dies. The husband gets remarried a few years later and suffers a massive heart attack and dies. The widow mother is still alive as well as my neighbor. They inherit as a 50 % partner the new wife who no one knows. The wind up was they sold off the property for big bucks and the business folded. The widow mother long ago (8 years) gave her kids their inheritance early, a stranger got half of it.

This sort of scenario is the reason our small business (Sub S) had a resolution for a buy-sell agreement. Essentially the business had insurance policies on each of the share holders. When one would die, the proceeds would allow the Corp. to buy the shares of the one who died. The relatives of the deceased got bought out with no chance to become a share holder. Guess what. The youngest share holder did die and the Corp. bought the shares back. The alternative could have been a nightmare (without going into details.) The terms of a buy-sell can be tricky, so the shareholders really need to think about how it might play out. YMMV

[Koolau]

Quote:

Originally Posted by Amethyst "A stranger got half of it." You meant the second wife, right? Not "a stranger." A relative by marriage. Sounds like the others chose to ignore and disdain this new relative. Serves them right.

I would suggest we don't know enough to know if anyone was "served rightly." Heh, heh, I don't know any more about BCG's scenario than you do, but trust me, we KNEW the "other person" in our situation and let's just say it worked out better for all that we had anticipated this turn of events - even, as it turns out, for the "outsider." We put the buy-sell into place long before the "stranger" or "outsider" came into the picture, so it was not aimed at an individual - only at a potential situation. We thanked God that a very tough situation (loss of a family member and business associate) was not made worse by inclusion of a disruptive force.

Too long a story, but suffice to say, every life, every story, every relationship, every business is complicated. Simple assumptions about the way relationships "should be" don't always make for good policy. Naturally, you are free to disagree as YMMV.

[bclover]

So me and my late husband have unfortunately witnessed horrible, horrible family drama over inheritance. Three instances and one of them ended with one sister SHOOTING her brother over perceived inequality over the inheritance. That seriously turned us off of large sum inheritances.
I plan on continuing with what we decided. If I kick the bucket before grandkids the plan was.

Our kids each got a free education, my youngest will go to law school (if he decides) pretty much loan free, each will inherit a house and a small modest cash amount. throughout their lives they have traveled much of Europe and been to Disney more times than the law should allow. If I am blessed with grandkids they will also be able to go to college without loans.

I will continue to help them throughout their lives but any large estate will go to the charities late hubby and I supported.

My family is the Maury Povich episode "I slept with my brothers wife because he got more money than me when dad died".