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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3190
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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We are about to come into a huge amount of money as a gift

Customer Question

We are about to come into a huge amount of money as a gift and would like to know how much to set aside for taxes. We know nothing about this except that we will be donating a large portion to non profits around the country and funding a family foundation that we have started
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: I guess that's it for now
Submitted: 9 months ago.
Category: Tax
Expert:  ABC Accounting Group replied 9 months ago.

Hi. Here is some information on estate and gift taxes. There is a lifetime exclusion of $5.45 million. That means an individual can leave $5.45 million to heirs and pay no federal estate or gift tax.

The $5.45 million can be used to shelter the estate from taxation and/or can be used to defray the tax burden of giving more than the annual gift tax exclusion amount to any individual per year. This lifetime exclusion includes the $'s of the estate + any annual gifts he gives per individual that is over $14,000.

If he gives annual gifts of more than $14,000 per year, per individual, a gift tax return will have to be filled out; however, no tax will be owed.

There are unlimited gifts that are exempt from tax and the exclusion, such as paying for another person's medical or educational costs (the person leaving you the gift would have to pay directly to the school/doctor).

For the estate taxes, if applicable, if the person is a NYS resident, he has a NYS estate tax exclusion of about $5 million (effective in 2017). If he was a NJ resident, there is a very low exclusion - only $675,000.

The non-profit donations can count towards your deductions, as well, on your 1040.

Expert:  Barbara replied 9 months ago.

Different expert here - my name is ***** ***** please allow me to specifically answer your question about RECEIVING a gift.

Gifts are NOT reportable or taxable to the recipient (you) in the U.S.

You (as the recipient) would report the gift ONLY IF the gift is received from a foreign person in excess of $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests. You would use Form 3520 to report such a gift.

https://www.irs.gov/uac/about-form-3520

I hope my answer to your specific question is helpful.

Thank you and best regards,

Barb