Hi and welcome to our site!The gift is not taxable for recipients. Please see for reference IRS publication 525 page 31 left column - - http://www.irs.gov/pub/irs-pdf/p525.pdf
Gifts and inheritances. In most cases, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you.
There is no any amount limit. That is for income tax purposes. That would be the donor who files form 709 - gift tax return - not recipients of the gift. The gift tax return is required when the total value of the gift is above $14,000 (for 2013) per person per year.There will not be any gift taxes unless the lifetime limit of $5,250,000 (adjusted every year for inflation) is reached.
So based on your information - your Mother in law may simply gift away the total amount of $600k - and there will not be any federal gift tax liability.There is no gift tax in NY - see for reference - http://tax.custhelp.com/app/answers/detail/a_id/424/~/has-the-new-york-state-gift-tax-been-repealed%3FHas the New York State gift tax been repealed?
Yes, gift tax returns don't have to be filed for gifts made on or after January 1, 2000.So far - gift tax liability is not an issue, but filing gift tax returns might be required.Assuming she will gift $200k to each child - the taxable gift will be ($200k - $14k)*3=$558k - but no gift tax return liability because that amount is below the allowed lifetime limit that is $5,250k for 2013.
If she set a trust and move her assets to the trust - she need to consider the type of the trust.If that is a living trust which generally is classified as a revocable grantor trust - it is ignored for income tax purposes - and all assets are still considered as owned by her as long as she is alive. After she died - the trust becomes irrevocable - and is treated as a separate legal entity. She may create an irrevocable trust right away - and it will be a separate entity. In this case she will not legally own assets transferred to the trust.All depends on what type of properties she has and if she want retain control over these properties.. If these are financial accounts - she may name beneficiaries and account swill be transferred upon her death and she might not need the trust.If there are some real properties - the trust might be helpful to avoid probate.
Lev Ok so the fact is that we want to reduce a tax burden what is the best to do if its a irrevocable Trust is 600k in cash you are saying there are no look back is this correct can she put her house in the trust also
house is worth 650k she as one million in the back so what is the best thing to do to reduce her New State Tax liability
she fell down a flight of stairs 6 months and got lucky if she died she would have taxes on the 600 k because she is over the one million dollar mark
so what is the best direction we want to get here state down
You wrote "we want to reduce a tax burden" - as there is NO gift tax and there is nothing to reduce.If you are thinking about possible income tax liability - it will not be reduced with using the trust. You may only shift income tax liability from her to the trust. But generally trust's income tax rate are higher - so I do not see any savings.
if there is a trust made and its Irrovable Trust who can be the trustee there a 3 children involded would the trusty have full control of finiancial decision with the financial investor
and does it work who make the decision were to keep the money invested
If you are worry for transferring assets - I suggest to start transferring right away.Thus she may simply gift $14k to each child, their spouses, grandchildren, etc - and her assets may be reduced significantly. Then - she will do another round of gifting in 2014.
If she want to have a separate irrevocable trust - she may appoint as a trustee any person - including herself.She may appoint any child or all three children as co-trustees.
Lev you dont get gicing away 14 to 3 kids does not help reduce her tax burden asap she need to reduce her assets to bring it under the New York State l;aws if she died 6 months also she would be over the one miilion dollar mark and owe taxes on 600k that would have been over 125k in taxes
again we are trying to get rid of 600k to bring her burden down is it done with a Trust ? of gifting lump some at 200 k per child
what is best to do and why
If something happens to her in the next 6 months we dont want her to show she as 1.6 million to her name she is 600k over New York state rules we need to get 600k out of her name fast
That is correct - we may not solve all issues in short period of time. By gifting small amount - you will solve some issues - not all.But if assets will be transferred to the trust of gifted away - they will be also subject of NY estate taxes if she died too soon.The best would be start gifting as soon as possible - and hope she will live long enough to spend most of her assets.
is she does irrovocale trust with 600 k does this help reduce her estate asap who is the Trustee can trustee be one child or all 3
she will not spend any money she is old italian lady does not spend money please explain died to soon are you saying there is a look back ? if so how many years I thought gifting is no look back
this is not for medicare its to get her estate under one million dollars
what is the diference on just gifting the 200k to kids now
or having a trust with the 3 kids as benificary
if she put the money in a trust no bobody can touch the money until she dies is this corrct
if she gives the 200k to the kids now as a gift its liquid I am correct and she need money for medical purpores the trust would not help here correct the money would be tied up
All gifts and transfers to the trust within one year are included into her estate for estate tax purposes.
So - if she dies within one year from now - there is nothing you may do to reduce her assets.
So - the best would be start gifting as soon as possible - and hope she will live long enough to gift away most of her assets.
so whats best do if the kids need her to help with medical bills they would not have access to the trust until she dies
can she gift 200 k per kid then the money is liquid and she does in 3 years we are good
if she as monrey in iroovable trust then the money is not liquid correct
sorry if she gifts now large sums and lives for another 2 years we are good
Creditors may obtain a judgment and collect by levy on her assets.The judge may apply collection to assets that were gifted or transferred to the trust if the judge decides such assets are hiding from creditors.
if she as irrevocable trust money is not liquid correct
there no credit issues
Lev please answer question if she as irrovable trust the money cant be touched correct but will reduce her Tax issue
if she gift her money then money is liquid to chidren to use or help in 3 years to help medical bills etc
The irrevocable trust is a separate legal entity - assets in such trust do not belong to the settler and do not belong to beneficiaries (children). And if creditors obtain a judgment against her that judgment may not be used to levy on irrevocable trust assets.However if creditors find out about the trust that that she transferred the money to the trust after her liability existed - then creditors may request the judge to attach the judgment to the trust and in this case trust's assets may be levied.The best would be to negotiate with creditors and close the issue.
Hi Lev if she does irrevocable trust with the kids as the beneficiary,
can the trust be set up if she needs to take care of some health issues and she needs to pay some bills how can the trust pay for then if its irrvocable trust ?
after later i will give you nice review