Quote:
Originally Posted by ElDiabloJoe
My neighbor up north is an elderly woman. She has three adult children and wishes to split her estate up evenly amongst them. While sitting on a very healthy high 6-digits in various savings accounts and a paid off house, she is also sitting on an ever climbing 900,000 in investment funds with a large national advising firm.
While she understands she can give $18,000 a year to each without penalty incurred by any party, the is entertaining the idea of disbursing her 900,000 prior to death. This is due to her concern about the way the world is going, the wars, economic instability, dollar de-valuation, inflation, etc.
While under Trump there was something about up to 20 Million could be inherited without tax or fee consequence, she asked me about whether or not she could disburse the 900,000 without incurring any fees or tax consequences to her or the recipient children.
My amateur opinion is that the $300,000 each would be a taxable income event unless it were inheritance doled out after she passed away. That would cost each recipient approximately $65,000 in taxes (assuming combined Fed and State rate of 25%).
Are my initial thoughts on this accurate, or are there additional considerations and fiscal dynamics that would be at play in her scenario?
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If you gift more than the annual exclusion amount (the $18,000 per donor per donee that you mention) you can still do it without tax. A gift is never taxable as income to the recipient. The $13.61 million that is exempt from estate tax when you die can be used during lifetime to shield gifts in excess of the annual exclusion amount from gift tax. If you gift more than the annual exclusion amount you simply file a gift tax return to show how much of the lifetime exemption you are using to avoid tax on the gift.
However, those are the rules for federal taxes. Be sure to also consider the gift tax rules of the state in which she resides. There should be no income tax on the gift there either but there may be gift tax considerations at the state level.