Inheritance

[MelanieCPA]

Client is beneficiary of $100K+ from Dad's savings accounts. She plans to divide it evenly amongst her siblings (all adults). There are no tax consequences to the above situation, right?? Just verifying.

[jainen]

gift tax

>>She plans to divide it evenly amongst her siblings<<

It is subject to the normal requirements and exclusions of gift tax.

[OldJack]

>>It is subject to the normal requirements and exclusions of gift tax.<<

Well there you go again Jainen... jumping to conclusion with a broad statement. I agree it is a gift unless it is a settlement of a will contest or qualified disclaimer [Reg.§25.2518-1(b)].

[JoshinNC]

Yes there could be tax consequences.

Client is beneficiary of $100K+ from Dad's savings accounts. She plans to divide it evenly amongst her siblings (all adults). There are no tax consequences to the above situation, right?? Just verifying.

Assuming that there is $100,000 in money and 4 children (your client plus 3 siblings) your client will be making a taxable gift to his/her 3 siblings in the amount of $13,000 each. Why was your client the only one named as beneficiary?

[jainen]

gift tax

>>jumping to conclusion with a broad statement<<

I will narrow my answer for those who don't jump so well. Although there are many ways to structure a bequest, the original post says the client plans to divide her own share. To say she is dividing it according to the directions of the court or the will would conflict with the fact that she is the beneficiary of the amount in question.

To my mind (which is about as narrow as you can get) every possibility has been eliminated except that it is subject to the normal requirements and exclusions of gift tax.

[George Boutwell]

Although there are many ways to structure a bequest, the original post says the client plans to divide her own share. To say she is dividing it according to the directions of the court or the will would conflict with the fact that she is the beneficiary of the amount in question. To my mind (which is about as narrow as you can get) every possibility has been eliminated except that it is subject to the normal requirements and exclusions of gift tax.

Did you know there is a rock band called "P. O. D." that recorded an album titled "Payable on Death" ? Well, it doesn't really involve this question. We all know that Dad was of a mind to avoid lawyers, so that he wouldn't be an innocent bystander when someone started shooting at one. So this is a typical Hillbilly Probate case where one must wonder what would have happened if the Favorite Daughter had not survived the decedent. But it's possible that this was a Payable on Death account, and before going in and asking the bank for the money, the daughter has sought advice (not from a lawyer, of course, but from her tax gal) on whether she should arrange a disclaimer. If the money would go to the siblings exactly as she wants, according to the local law of intestate succession, then she can avoid the gift tax issues.

[FEDUKE404]

I'm confused

I'm kinda with Jainen on this one. The original post said the daughter distributed "her share" of dad's money which she received as a beneficiary.

While there may theoretically have been better ways to distribute the funds, if dad had intentions to do so, from my laymen's perspective it sure appears any money going to the siblings now is nothing but a gift from her.

I will follow the discussion to see what I can learn.

FE

[dsi]

Client is beneficiary of $100K+ from Dad's savings accounts. She plans to divide it evenly amongst her siblings (all adults). There are no tax consequences to the above situation, right?? Just verifying.

1. The beneficiary who received the $100K shouldn't have any tax consequences upon receiving this money.
2. If She distributes more than $12,000 to each sibling, then there appears to be potential gift tax consequences.

[JoshinNC]

we're assuming this is a &quot;savings&quot; account

1. The beneficiary who received the $100K shouldn't have any tax consequences upon receiving this money.
2. If She distributes more than $12,000 to each sibling, then there appears to be potential gift tax consequences.

If this is an IRA than there could be tax consequences for the beneficiary too.

[Joe Btfsplk]

The solution

1. The beneficiary who received the $100K shouldn't have any tax consequences upon receiving this money.
2. If She distributes more than $12,000 to each sibling, then there appears to be potential gift tax consequences.

The solution is to distribute less than $12,000 this year and pay the rest after this year.

[MelanieCPA]

Thanks...

for all of your responses. I have no idea why her Dad left it all to her, but I think she's feeling bad and wants to pay them each ASAP.
Tell me if I'm reading the gift tax rules correctly... Say she gives each sibling $20,000. Each one has an $8,000 taxable gift. No tax consequence for the recipients, and that reduces the donor's $1 million gift tax exclusion. These are her first gifts, so there are no immediate consequences other than having to file the gift tax return, correct?

Also, what if she gave each sibling and his/her spouse each a check for 10k (as opposed to each sibling receiving a check for 20k)?? Would this avoid having to report a taxable gift?

[jainen]

those very spouses

>>Would this avoid having to report a taxable gift?<<

Yes, as would Joe's solution to give 1/2 in 2007, 1/2 after the first of next year. If she feels "bad" about her father leaving everything to her, maybe she should ask the attorney who drew up the will if he knows what the reasoning was. She might feel worse if she gives the spouses half the inheritance and later finds out the siblings were disinherited BECAUSE of those very spouses!

[Bees Knees]

If the client is married, then she can elect gift splitting with her husband and the two of them can each gift $12,000 to each sibling ($24,000 total to each sibling) without getting the sibling’s spouses involved in the gift.

[JoshinNC]

but your client must still file a gift tax return

If the client is married, then she can elect gift splitting with her husband and the two of them can each gift $12,000 to each sibling ($24,000 total to each sibling) without getting the sibling’s spouses involved in the gift.

and elect gift splitting.