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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 Dad is is living in an assisted living facility and was

Customer Question

My Dad is is living in an assisted living facility and was worried that he will not have a lot of money to will to me and my husband. He recently sent us two checks, one to me and one to my husband made out to $40,000 each. My husband's family has cautioned us not to cash the checks because we and or my dad will be heavily taxed. They said that he should only give us $12,000 per year. My Dad just wants us to have the money now. I was wondering why a parent can not give his or her child/children money from their own account. If there is a gift tax on this money, who should pay and how much? Any help would be very much apprecited!
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello Woofie,

There would likely be no tax consequences here, but your father would have to report the gifts.

First, if and when gift tax is ever due, it is paid by the donor and not by the recipient of the gift. However, under current regulations, each taxpayer is allowed to give gifts in their lifetime of up to $1 million before any gift tax becomes due. This is part of what is called the Uniform Tax Credit Act.

In addition to the $1 million lifetime exemption, each individual is allowed to give annual gifts of up to $13,000 to any number of individuals, and those gifts do not even apply towards the lifetime exemption, nor do they need to be reported. Gifts which exceed the annual exclusion of $13,000 must be reported by the donor by filing Form 709 with the IRS to report the value of the gift. However, no tax is actually due unless that donor has already reached his $1 million lifetime limit. The amount reported then reduces that donor's remaining lifetime balance that he may give in non-taxable gifts.

If this was helpful please press the Accept button. Positive feedback is also greatly appreciated.

Thank you Woofie.

Merlo and other Tax Specialists are ready to help you
Customer: replied 8 years ago.
This was fantastis advice. And the reply was almost instantaneous! I am also glad that the tax expert provided a source (Uniform Tax Credit Act) to consult. Thank you!
Expert:  Merlo replied 8 years ago.
Thank you Woofie.