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John, Attorney
Category: California Employment Law
Satisfied Customers: 5729
Experience:  Licensed and practicing attorney.
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I'm on good terms with a 28 year old former employee who

Customer Question

I'm on good terms with a 28 year old former employee who left after 2 years to go to medical school in New York ,where she's in 2nd year. I recently sent her distribution election forms for her small retirement plan distribution of $490. She wrote me that
she plans to elect to get the $ in cash, not roll over to e.g. a SEP or IRA account. QUESTION: Is it illegal or improper for me to send her a gift of $500 so she'll have the $ but would be able to deposit her distribution into an IRA? She was a great employee,
and has poor parents. note: There is absolutely no other personal relationship between us besides friendly former employer - employee, She worked very hard for me and I'd like to see if I can help her make a sounder choice with her money.
Submitted: 1 year ago.
Category: California Employment Law
Expert:  John replied 1 year ago.

You could send her the gift but then she would still have the money in her retirement plan. In other words you cannot gift around her tax consequences of a non-rollover. What you could do is gift to her what are her potential tax consequences, which are $140. There's nothing illegal about this in either event. You would be well within the tax exempt gift amounts if you pick either of these options.