Comments on: Gift Laws and Taxes Made Simple

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By: uberVU - social comments

uberVU - social comments — Mon, 14 Dec 2009 07:12:23 +0000

Social comments and analytics for this post…

This post was mentioned on Twitter by taxdoctoralerts: Explanation of Gift Laws, Taxes and Restrictions | My Journey to …: As far as medical payments, you are payin.. http://bit.ly/8stF86...

By: The Katana: Don't Count Out The US Consumer! Week In Review 11/30 | Financial Samurai

Mon, 30 Nov 2009 09:02:09 +0000

[...] * “Gifting Laws Made Simple” by Evan gives us the basics of how to gift legally without incurring more tax penalties than you have to. Thanks to Evan, I can’t give much of anything to my family if I win the WSOP! The money will all be MINE! [...]

By: Evan@MyJourneytoMillions

Evan@MyJourneytoMillions — Wed, 25 Nov 2009 04:16:28 +0000

FS,

Lets ignore 529s for a second (no I wasn't using an arbitrary number I was using annual exclusion – $13K – and prepaying up to 5 years of gifts = 65K) in order to get the unlimited tuition you need to pay the school directly not just earmark some money and swear the IRS thats what you were going to use it for.

By: Financial Samurai

Financial Samurai — Wed, 25 Nov 2009 00:32:00 +0000

Ah, I C. Still a little confused. Where did you get $65k/each for their 529s? Is that an arbitrary number you are using?

I'm talking 1 meeeleon dollars for education, so I don't have to pay tax!

By: Evan@MyJourneytoMillions

Evan@MyJourneytoMillions — Tue, 24 Nov 2009 19:26:20 +0000

FS,

You love the estate planning stuff!

IRS isn't letting you 'earmark' future gifts. But what you can do is use your gifting dollars to fund a trust or a 529 plan (529s you can pre-fund for 5 years).

So you have 2 grandchildren, A & B - in year 1 you can put $65K into each of their 529s. You can't use your annual exclusion for those two donees until year 5, but you have removed $130k of VALUE that would have otherwise been taxable. Alternatively and I think your actual question, if A & B are in college you, kind grandfather, can write the check to Harvard for $50K with no problem and no gift tax issues.

As far as medical payments, you are paying it for the benefit of another (otherwise we are dealing with income tax deductions and medical payments) - and then if you got audited (or if your estate got audited) there would be some explaining to do.

By: Financial Samurai

Financial Samurai — Tue, 24 Nov 2009 17:40:56 +0000

Love this post Evan, and very useful! Tell me more, and tell me this. Let's say I'm over the estate tax cap by $1million. Can I just earmark $1 million gift to my grandchildren and classify it as tuition?

How about if I classify the mil as a medical payments for rehabing a broken bone or something?