Gift Taxes

[rcooley25]

Sometime in the near future my wife and I will inherit a condo from my mother-in-law. If we immediately transfer this condo to my son will this be subject to the gift tax? We will not be making this in anticipation of death so I don't think it should be subject to the gift tax. What say you?

[George4Tacks]

Talk to the executor and attorney about disclaiming the inheritance.

[Just-Lisa-Now-]

a gift tax return may well be in order, but that would just be to report the gift, no tax due.

[Accountant-Man]

Anticipation of death or not is irrelevant. It's a gift.

[jofijohnjoseph]

Why not make things simple and have your mother in law have your son inherit the condo upon her death? That eliminates any need for you and your wife to serve as middlemen.

[rcooley25]

My mother-in-law is in a nursing home suffering greatly from Alzheimer's. She is totally incapable of making a decision like this. Since I originally mad this post, I have learned alot about gift taxes. Gift taxes come into play when a gift is given to keep it out of a person's estate. Since there is not an estate tax unless the estate is about one million dollars and since my mother-in-law nor myself has a estate nearly that much I think I have been making much to do about nothing.

[qbteachmt]

Now would be the time to confirm what happens if you are going to reject that inheritance. Someting to try, instead: A POA cannot change a will, but perhaps your State has a Pay On Death deed/title provision. The POA with financial powers should be able to put a beneficiary deed on file listing your son. That removes the property from the estate entirely.

[abctax55]

The estate tax exclusion is a wee bit more than one million:

https://www.legacyplanninglawgroup.com/estate-tax-exemption-amount-goes-up-for-2022/

[rcooley25]

You are right. It is a big wee wee.

[rcooley25]

My wife has power of attorney so that would not be a problem if it came to that. But as I said in a previous p[ost I think I have been making a lot to do about nothing. MY mothers-in-law estate nor my estate is going to be large enough where there will be an estate or gift tax problem.

[qbteachmt]

"MY mothers-in-law estate nor my estate is going to be large enough where there will be an estate or gift tax problem."

It isn't clear if you are trying to consider gift, estate, or both, though. Your mother-in-law can have a condo worth $500,000 FMV, which is well under the estate limit, but exceeds the gift tax exclusion for you, when gifted to your son. If you deed it as POD, he gets the benefit of the step up and there is no gift tax consideration or reporting at all in this scenario. If you wait to inherit it, then give it to him, you created more trouble for yourself than might be necessary. While you get a step up in basis due to inheritance, that's a different issue than exceeding the gift tax exclusion for the value, which is $16k for 2022 and $17k for 2023.

And you don't really know when the property will transfer by death. "Individuals taking advantage of the increased gift tax exclusion amount in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels." By then, this condo might have significant impacts on your estate plan, because your own estate might be higher by then, as well.

[sjrcpa]

"That removes the property from the estate entirely."

No it doesn't. It's still part of the estate but it would go to the son upon her death.

[qbteachmt]

30 States have transfer on death for titled property (vehicles and real estate); it passes directly, the same as any pay on death/beneficiary provision for financial accounts, annuities, and similar assets. My point was, it doesn't pass to the estate for pooled distribution; it's already direct giving.