My M-I-L is a BUM! Looking for tax advice (gift tax and giving house away)

[rmcelwee]

My M-I-L is a bum. Wife's 92 year old grandfather is a 100% disabled veteran with $100K in the bank, a $200K house and a 2nd $85K house (in terrible shape). MIL lives in the 2nd house and is destroying it daily. The house needs $7500 in roof repair and we are close to writing a check for it. So, here are my questions:

1) Wife's grandpa has $100K in the bank and wants to give everything above $100k each month to my wife. We don't really need the money so we will invest the $3,00-$4,000 per month (his pension, VA benefits, SS, etc) in stocks to take care of my MIL (remember, she is a bum) in the future. I don't really understand gift tax and think that he will have to pay gift tax on the $36K-$48K per year but maybe that falls under lifetime gift tax exemption and he will pay nothing. The principals here are Grandpa, my wife, me and MIL. Can we take $48K per year without involving the IRS (other than filling out some forms on April 15th)?

2) Did I mention MIL is a bum? She is destroying the house and wife's grandpa wants it out of his name due to stress/sanity. One idea is to have him repair the roof (I guess raising his cost basis) and then transferring the house into her name. The house was purchased for around $80K and would be worth ~$120K in good shape (it is DEFINITELY not in good shape, not even fair shape). It would probably assess right now without the repairs for $75K. She lives on a small SS, food stamps and $200 or so per month that he gives her. He pays all taxes, insurance, etc on the car/house.
What is the best way to get it into her name with minimal tax consequences? This is a 2nd home (has owned it for years) and is paid for. He is in Florida and she/house is in South Carolina. I don't know about recent years but in the past he was keeping receipts to prove that he was spending time in the house each year. I don't know how that affects anything.

I know these are some rough questions and I really need expert advice but it would be very nice to hear your suggestions. Thanks!

 

[Teacher Terry]

What a mess. Please be sure Grandpa is taken care of before MIL since it’s his money.

 

[daylatedollarshort]

Sorry to hear about your MIL situation. This link to the Turbotax site has a good explanation of gift tax limits (2018 limits) - https://turbotax.intuit.com/tax-tips/estates/the-gift-tax/L1sFpFeXV

 

[rmcelwee]

Turbotax site has a good explanation of gift tax limits (2018 limits)
[/URL]

For some reason we cannot post a link to that page. Just copy/paste the info below into your browser and you guys can find it (in case others want to read it). Thanks for the good read! 30 seconds of reading and all questions were answered. I don't know why the other articles I was reading made it so difficult.

turbotax.intuit.com/tax-tips/estates/the-gift-tax-made-simple/L5tGWVC8N

 

[RunningBum]

I'm trying to figure out how even a bum can destroy the roof of a house.

It doesn't sound like grandpa will have anywhere near an $11M estate, so gifting more than $15K/person/year is unlikely to wind up causing any extra taxes, just a little paperwork. Read the link provided above.

 

[pb4uski]

I think in your situation that there will be no gift tax to be paid, but there are informational filings that will need to be done to acknowledge the gifts towards grandpa's unified credit.

 

[rmcelwee]

I'm trying to figure out how even a bum can destroy the roof of a house.

The paint came off the facial boards years ago and there are football sized holes in the rotten wood. She is not at all concerned by this. Instead of fixing it she bought Tinkerbell floor mats, bumper stickers, windshield headers, steering wheel wraps, etc for her car when the money was given to her. It literally rains in her attic at this point. Actually, I'm guessing this because we no longer visit her. She has three dogs that use the bathroom on her carpet and I can't take the smell. Completely disgusting...

I would love to have her committed or the house condemned or something but I am not in charge. The only thing I can do is offer suggestions to Grandpa. When he is gone, DW and I will be in charge and things will be different.

 

[Bestwifeever]

The 92-year-old, 100 percent disabled vet is in charge of his daughter who may be mentally ill to live in a derelict house? Oh my. Good luck to your DW in dealing with this.

 

[rmcelwee]

The 92-year-old, 100 percent disabled vet is in charge of his daughter who may be mentally ill to live in a derelict house? Oh my. Good luck to your DW in dealing with this.

DW is a saint but the stress is getting to her. I'd love to help but again, I'm not in charge. Everything will change at some point.

 

[Bamaman]

Sometimes it's just impossible to help someone that refuses any help.

This is a prime example of where "blood is thicker than water." My hat's off to the father that continues to support his daughter without fail.

But when things get so painful for others, it's time to each go their own way.

 

[rmcelwee]

My hat's off to the father that continues to support his daughter without fail.

He's an enabler. She's nuts but he's just as bad. She's been daddy's little girl for 70 years. I could have remedied the situation many times over if I had my way.

 

[Pellice]

rmcelwee, are you and your wife clear on what you want to come out of this? You have one clearly articulated goal that you will be able to act on: no tax consequences. I'm sure you have others, but it may help to write them down, e.g.

- keep stress away from you and your wife. (This may involve using money towards some sort of agent who will manage MIL issues without your having to go there)
- remove stress from Grandpa (this is already fairly clear)
- keep MIL afloat. Does this require keeping her in the house? (Sounds like it does, but worth asking).
- assuming it does, what is the best way to get house taken care of, now and in the future, with minimal involvement from you (what makes this easier is that you're already earmarking the money for MIL, so you have *enough* funds to deal with this in, not the most economical way, but the way most useful to you)

Consider making liberal use of advisers in setting up the money, representatives to oversee house repairs, and lawyers to deal with hysterical protests from MIL. All that is costly, but in this case you need to move forward without wasting your time or mental energy. If Grandpa is transferring the money to you, let him know in advance that it will be used for MIL but in a firm way.

You've probably thought this all through already, but I'm just hoping that you can deal with it clinically and keep yourselves out of the vortex.

 

[ivinsfan]

DW is a saint but the stress is getting to her. I'd love to help but again, I'm not in charge. Everything will change at some point.

Sorry to burst your bubble but nothing will change...

My advice is take the money GP wants to give you and use on yourselves and or save it. Do not pay for a new roof do not interact with trying to "help" Mom. Once you start down that rabbit hole you can't get out. You call her a bum but seem to also agree she is mentally ill. which kind of negates the bum label.

Pellice I can't agree with hiring lawyers and/or advisers, there is very little they can do to alleviate this situation. It's not their job to keep MIL afloat her Dad is still alive at 92 which means a possible 25 years of financial and mental caretaking. Just don't...

IMO is better to support the daughter as to trying to pull away and realize they are not responsible for lifelong caretaking of a mentally ill person. Use the public safety nets in place.

 

[ivinsfan]

He's an enabler. She's nuts but he's just as bad. She's been daddy's little girl for 70 years. I could have remedied the situation many times over if I had my way.

You can't remedy anything, you're kidding yourself...ask anyone here how easy it is to remedy things like a life long mental issue with a family member.

 

[rmcelwee]

- keep MIL afloat. Does this require keeping her in the house?

Yes, she will be in that particular house until Grandpa is out of the picture. We will take care of her but it will most definitely be under different (healthier) circumstances in time. It pains me to see the family so messed up right now but it will get better.

 

[rmcelwee]

Sorry to burst your bubble but nothing will change...

Thanks! (where is the emoji for sarcasm Ugh...

 

[Pellice]

Yes, she will be in that particular house until Grandpa is out of the picture. We will take care of her but it will most definitely be under different (healthier) circumstances in time. It pains me to see the family so messed up right now but it will get better.

Sounds good. You've set out another result you want to come out of this: ultimately to move MIL out of the house into something healthier for her. This has some steps that you're already thinking about, e.g. keeping the house from further disintegration so it can be sold later. Just keep it "clinical" so MIL may be messed up and grandpa may be messed up, but you and your wife are going to stay sane!

 

[ivinsfan]

Thanks! (where is the emoji for sarcasm Ugh...

I'm being honest here for you and your DW's sake..look at Grandpa stressed out at 92 about a 70 year old "child".


Good intentions and hopes are aplenty, but the reality is different.

 

[ivinsfan]

Sounds good. You've set out another result you want to come out of this: ultimately to move MIL out of the house into something healthier for her. This has some steps that you're already thinking about, e.g. keeping the house from further disintegration so it can be sold later. Just keep it "clinical" so MIL may be messed up and grandpa may be messed up, but you and your wife are going to stay sane!

How do you keep it clinical when dealing with a 70 year old with long standing mental problems? You do understand you can't forcibly move people from their own homes, right? MIL has 3 dogs what are you going to do about that?

 

[The Cosmic Avenger]

Since the house needs repairs, my first thought was that it would be more tax-efficient for the recipient to gift the house to them as-is and then pay for the repairs, which would reduce their cost basis (in this case, $75 vs. $120K) if they sell. However, you will probably want to do the opposite, given that 1) you probably aren't concerned about making this more profitable for your MIL, and 2) logistically and legally, you're better off doing the repairs while GFIL owns the house, since he seems relatively more reasonable and sensible.


Just remember, in situations like these it's generally best to insist on paying bills/invoices directly, so you know the things you want to provide (e.g., utilities, a house that isn't condemned) are actually provided, and they are not using the money for other things.

 

[ivinsfan]

One thing no one has mentioned is Medicaid look back for Grandpa...as a 100% disabled vet different rules might apply. He would be eligible for VA nursing home care but they seem to have long waitlist. You need to check this before ANYTHING gets given away.

If GP owns the house he can pay for all repairs without any lookback issues at all.

 

[pj.mask]

If the parents are still married I don’t think any paperwork is required for <$60k

FIL gives you $15k and wife $15k
MIL does the same. They can do more than 60 if you have kids.

If they are divorced then may be other options.

 

[gwraigty]

The principals here are Grandpa, my wife, me and MIL.

If the parents are still married I don’t think any paperwork is required for <$60k

FIL gives you $15k and wife $15k
MIL does the same. They can do more than 60 if you have kids.

If they are divorced then may be other options.

A FIL isn't a principal in this whole mess.

 

[Starsky]

It's very nice that you and your DW are helping to take care of your MIL. I'm sure it's a lot of work. Regarding the gifts, your tax issues should be minimal and well below any gift limits. Any accountant should be able to answer your questions very easily.

The bigger issue seems to be you. It's very sad to hear someone call their MIL a 'bum' repeatedly in a post. Especially one who seems to be slightly mentally ill and living on handouts. For her to keep up maintenance on a home by herself seems like a bit of a stretch. I'd bet she's doing the best she can.

Negative labels can hurt you as much as they hurt others. They tend to reinforce your worst thoughts and ultimately reflect more about the labeler than the labelee. Try to open your heart, in addition to your wallet, and show some empathy. Throwing money at a problem is the easy part. She is your wife's mother, and it probably hurts her a lot to see her mom in this condition. I doubt she'd be happy about you calling her a 'bum'. (Just try to imagine if she called your mom a 'bum' in an argument)

Slow down and remember that not everyone is as fortunate as you are. I'm sure you'd be super miserable living in your MILs shoes. You can't change her behavior, you just have to accept it as-is. A little love and kindness will go a long way to make you and your family feel better about the situation.

 

[gwraigty]

The bigger issue seems to be you. It's very sad to hear someone call their MIL a 'bum' repeatedly in a post. Especially one who seems to be slightly mentally ill and living on handouts. For her to keep up maintenance on a home by herself seems like a bit of a stretch. I'd bet she's doing the best she can.

Negative labels can hurt you as much as they hurt others. They tend to reinforce your worst thoughts and ultimately reflect more about the labeler than the labelee. Try to open your heart, in addition to your wallet, and show some empathy. Throwing money at a problem is the easy part. She is your wife's mother, and it probably hurts her a lot to see her mom in this condition. I doubt she'd be happy about you calling her a 'bum'. (Just try to imagine if she called your mom a 'bum' in an argument)

Slow down and remember that not everyone is as fortunate as you are. I'm sure you'd be super miserable living in your MILs shoes. You can't change her behavior, you just have to accept it as-is. A little love and kindness will go a long way to make you and your family feel better about the situation.

Not the OP here, but respectfully, you don't know the OP's MIL at all. I'm confident that OP and DW know MIL/DM well enough to know if the term "bum" is warranted. OP's DW may very well refer to her DM as such, for all any of us know.

Disclaimer: BTDT