[Justputt]

When we box and only then, will our kids get money. The young tend to be wasteful. I'd rather they get it when they are older, God willing, and perhaps it will supplement their retirement. IMO, they need more time learning the value of money, saving for stuff, saving for retirement, and hard work. I was into my mid-60s before either of my parents passed, and we used it to buy our house in TV, leaving retirement untouched. They'll be in good shape after we start our dirt nap. Lastly, while we're in good shape now, there's no telling the future or what we may need (assisted living, major medical bills, long-term hospitalization, etc.), and we saved for those potential scenarios, so why mess the plan up by trying to make the kids life cushier now?

[Greg L]

It is not taxable unless it is an appreciated asset such as a house or stocks and even then the gain is only taxable upon a subsequent sale by the recipient. If she has cash or unappreciated assets she should feel free to give away anything IN EXCESS of what she needs.
As my mama said "The best gift is one given with a warm hand"
Greg, retired CPA

[Fastskiguy]

I think I understand you can give 18K/yr and not tell anybody anything. You can give more, up to your 13 mil lifetime, you just have to tell the IRS. But it's the tax bit I don't understand (apologies if this is a thread hijack).

Let's say a person has 1 million in cash they want to give to another person. Fill out your form, write a check, and we're done.

However, let's say a person has 1 million in stock that they bought in 1970 for $10K. If they give the stock to the other person without paying tax and if the recipient wants cash to buy a house or whatever then they'll need to sell the stock and pay the capital gain tax....is that right? No way to get of the gains taxes?

Finally, if the old person dies and leaves the million in stock to the other person then they start with a cost basis on the day of death....they can sell that day and not pay ANY tax...is that right?

Thanks

Joe

[retiredguy123]

Originally Posted by Fastskiguy

I think I understand you can give 18K/yr and not tell anybody anything. You can give more, up to your 13 mil lifetime, you just have to tell the IRS. But it's the tax bit I don't understand (apologies if this is a thread hijack).

Let's say a person has 1 million in cash they want to give to another person. Fill out your form, write a check, and we're done.

However, let's say a person has 1 million in stock that they bought in 1970 for $10K. If they give the stock to the other person without paying tax and if the recipient wants cash to buy a house or whatever then they'll need to sell the stock and pay the capital gain tax....is that right? No way to get of the gains taxes?

Finally, if the old person dies and leaves the million in stock to the other person then they start with a cost basis on the day of death....they can sell that day and not pay ANY tax...is that right?

Thanks

Joe

Everything you said sounds correct to me.

[Topspinmo]

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?

Only rich get out of paying taxes.

[Fastskiguy]

Originally Posted by retiredguy123

Everything you said sounds correct to me.

Rats....that means either you pay on the gains or somebody has to die. But I guess it kinda makes sense. Thank you!!

Joe

[Topspinmo]

Originally Posted by Justputt

When we box and only then, will our kids get money. The young tend to be wasteful. I'd rather they get it when they are older, God willing, and perhaps it will supplement their retirement. IMO, they need more time learning the value of money, saving for stuff, saving for retirement, and hard work. I was into my mid-60s before either of my parents passed, and we used it to buy our house in TV, leaving retirement untouched. They'll be in good shape after we start our dirt nap. Lastly, while we're in good shape now, there's no telling the future or what we may need (assisted living, major medical bills, long-term hospitalization, etc.), and we saved for those potential scenarios, so why mess the plan up by trying to make the kids life cushier now?

Government adding trillions to debt every year not going to be good for joe citizen even in next century and probably beyond.

[Fastskiguy]

Originally Posted by retiredguy123

Everything you said sounds correct to me.

Originally Posted by Fastskiguy

I think I understand you can give 18K/yr and not tell anybody anything. You can give more, up to your 13 mil lifetime, you just have to tell the IRS. But it's the tax bit I don't understand (apologies if this is a thread hijack).

Let's say a person has 1 million in cash they want to give to another person. Fill out your form, write a check, and we're done.

However, let's say a person has 1 million in stock that they bought in 1970 for $10K. If they give the stock to the other person without paying tax and if the recipient wants cash to buy a house or whatever then they'll need to sell the stock and pay the capital gain tax....is that right? No way to get of the gains taxes?

Finally, if the old person dies and leaves the million in stock to the other person then they start with a cost basis on the day of death....they can sell that day and not pay ANY tax...is that right?

Thanks

Joe

OK and I have a quick followup.....let's say the old person gives the other person 1 mil of appreciated stock, no tax. Until they sell it, then gains taxes.

OK....when the old person dies is the cost basis stepped up like it would be in a "regular, passed the stock when he died" type scenario?

I'm guessing "no" as once it's given then it's the young persons' stock and so when or if the person dies makes no difference.

Which, if true, makes giving appreciated assets when you are close to dying a much more difficult decision. You'd like to give it while you're alive but the taxes (again, on appreciated assets) are definitely a factor!

Joe

[retiredguy123]

Originally Posted by Fastskiguy

OK and I have a quick followup.....let's say the old person gives the other person 1 mil of appreciated stock, no tax. Until they sell it, then gains taxes.

OK....when the old person dies is the cost basis stepped up like it would be in a "regular, passed the stock when he died" type scenario?

I'm guessing "no" as once it's given then it's the young persons' stock and so when or if the person dies makes no difference.

Which, if true, makes giving appreciated assets when you are close to dying a much more difficult decision. You'd like to give it while you're alive but the taxes (again, on appreciated assets) are definitely a factor!

Joe

The key is the cost basis of the stock. With a gift, the recipient of the stock must keep the same cost basis that the giver had. So, if the giver had a cost basis of $10K, the recipient must live with that basis. But, with an inheritance, the cost basis is "stepped up" to the stock value at the time of death (although, in some cases, I think the beneficiary may be able to opt to use the stock value 6 months after death instead). Once the gift or inheritance takes place, the cost basis is set and the owner of the stock must pay a capital gains based on the sale price minus the cost basis. It doesn't make any difference when the giver dies after he made the gift.

[OrangeBlossomBaby]

If someone has a lot of money and/or assets, in Florida, everything has to go through probate before the beneficiaries of that money/assets can take their inheritance. That's unless there's a Trust, or if it's all cash under the mattress or in a wall safe and the beneficiary gets to it before the lawyers do.

If you don't have a Trust, then your kids will have to wait while a lawyer makes sure that anyone who is OWED money - utility companies, mortgage and/or loans, taxes, the handyman, the roofing company, the dogsitter - gets what is owed to them first. Beneficiaries get their appointed share of whatever is left over.

With a Trust, the beneficiaries already technically own it all. At the declaration of death, it transfers automatically, because the deceased's name is simply removed from the proof of ownership.

[dewilson58]

Originally Posted by OrangeBlossomBaby

With a Trust, the beneficiaries already technically own it all.

Hmmmmm, not really...........I can change beneficiaries at any time without the "technical owner(s)" input.

[retiredguy123]

Originally Posted by OrangeBlossomBaby

If someone has a lot of money and/or assets, in Florida, everything has to go through probate before the beneficiaries of that money/assets can take their inheritance. That's unless there's a Trust, or if it's all cash under the mattress or in a wall safe and the beneficiary gets to it before the lawyers do.

If you don't have a Trust, then your kids will have to wait while a lawyer makes sure that anyone who is OWED money - utility companies, mortgage and/or loans, taxes, the handyman, the roofing company, the dogsitter - gets what is owed to them first. Beneficiaries get their appointed share of whatever is left over.

With a Trust, the beneficiaries already technically own it all. At the declaration of death, it transfers automatically, because the deceased's name is simply removed from the proof of ownership.

I don't have a trust, but all of my investment accounts have a designated transfer on death (TOD) beneficiary. So, these accounts do not need to go through probate.

[Slainte]

Originally Posted by OrangeBlossomBaby

If someone has a lot of money and/or assets, in Florida, everything has to go through probate before the beneficiaries of that money/assets can take their inheritance. That's unless there's a Trust, or if it's all cash under the mattress or in a wall safe and the beneficiary gets to it before the lawyers do.

If you don't have a Trust, then your kids will have to wait while a lawyer makes sure that anyone who is OWED money - utility companies, mortgage and/or loans, taxes, the handyman, the roofing company, the dogsitter - gets what is owed to them first. Beneficiaries get their appointed share of whatever is left over.

With a Trust, the beneficiaries already technically own it all. At the declaration of death, it transfers automatically, because the deceased's name is simply removed from the proof of ownership.

If you place POD (Pay on Death) on your bank accounts, check (annually) that your beneficiaries are listed correctly on insurance, pensions, etc., and do an ‘enhanced Lady Bird Deed’ on each Real Property held, check unclaimed property in your states, do a Transfer on Death Deed for investments or list beneficiaries thereon, there may be no need for Probate. In many other states, Transfer on Death deeds are used for real estate; the issue with them is they are not triggering reimbursement to Medicaid for help with nursing home expenses, which many middle class people with savings often need.

[Decadeofdave]

From another angle, our friends kids want to know their inheritance amount so they can figure out how long they won't have to work. An inheritance is a blessing, not a right, just my humble opinion.

[JMintzer]

Originally Posted by Topspinmo

Only rich get out of paying taxes.

Except they don't... the top 1% pay 46% of ALL Federal Income Taxes, yet they only earn 26% of the income...

The bottom half of taxpayers earned 10.4 percent of total income and paid 2.3 percent of all federal individual income taxes.