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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My ailing step dad wants to give us most of our cash inheritance

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My ailing step dad wants to give us most of our cash inheritance now. And when I say cash I mean he's given us a choice between cash or inuities. He recently had another (of multiple) mini stroke so he's concerned that he may not have long to go. By doing this he belives he will make this both easier on us and obviously quicker to recieve than going through the settling of the estate. I will be the executor of the estate. It feels uncomfortable to even talk about this at this point, he threw me for a loop even bringing it up as our main focus is for his health and well being. That being said, these are his wishes but looking at it practically it does bring up some concerns. The inheritance would be below the limits of what the state / federal would tax, but if he is still living I'm guessing it doesn't count as inheritance but as a gift? So my question would be, is there a way for him to give this to us as inheritance before he passes without the money being taxable? Thanks, Lana

I am sorry to hear about your step dad's ailing health.

As far as the gift situation, tax would not be an issue here. Under current regulations, each individual is allowed to give up to $1 million in their lifetime in gifts before any gift tax would be due. They are also allowed to give annual gifts to any one individual of up to $13,000 with no reporting requirements.

If your step dad gives any one person more than $13,000 in the same year, then he would need to report the gift by filing Form 709 which is a gift tax return. No tax would be due with the form if he had not already exceed his $1 million lifetime limit, but it would be a reporting requirement.

And yes, this would simplify matters for you rather than having to settle the estate.

The only thing you would want to avoid is having him actually give you a gift of property, such as a home. The reason for that is that you would retain the same basis in the home as his basis when you receive property as a gift. If instead you inherit property, you receive a stepped up basis, meaning your new basis is the fair market value of the property or home on the day you inherit it. This would mean less taxable gain at the time you sell the property.

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Thank youCustomer

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