How do death and taxes work?
December 22, 2015 8:42 AM   Subscribe

My grandmother is in hospice and my father will be inheriting the majority of her savings after she passes. He would like to give me a large-ish amount of money from this, but how does that work?

I realize you are not my lawyer, nor my accountant. My father will be inheriting the sum of my grandmother's estate and is currently a co-signer/holder on her bank accounts. This is not a sketchy thing-- he has been the main support and care for my grandmother for the last decade or so and she was of sound mind and body when those decisions were made. She won't be going into a facility (she's currently at home and I am one of the main care providers alongside hospice nurses and social workers) and pretty much everything like funeral costs are paid for already. My father would like to give me (from her estate) something like $5,000 but we're worried about any repercussions for me, tax wise. I live full time in Massachusetts and my grandmother and father are residents of Minnesota. How do gifts like this work? Can he just write me a check from her account now and that will be that?
posted by thefang to Work & Money (6 answers total) 1 user marked this as a favorite
As the recipient of a monetary gift of any size, you do not have any tax consequences. Your dad as the gifter can give you a specific amount each year without triggering gift taxes for himself (currently $14,000). So $5000 will not trigger any tax for anyone.

Can he just write me a check now?

He should not do any of that until your grandmother has passed. And only once his share of the estate minus taxes and bills has been determined and he has taken possession of those funds in his account.
posted by cecic at 8:56 AM on December 22, 2015 [4 favorites]

Well, he could give you the $5,000 now if he has $5,000 of his own money to spare. He should not give you anything from the estate though.
posted by kindall at 9:12 AM on December 22, 2015 [3 favorites]

Can he just write me a check from her account now and that will be that?

Depending on the nature of his power of attorney regarding the bank account, he possibly could in the form of a gift from your grandmother, but depending on how the will is written, it could affect how much money various parties get and create bad blood. Depending on your family, this may or may not be an issue, but settling estates often brings out the worst in people. She certainly could simply write the check now and given that you're shouldering the burden of being a care provider, that should certainly seem appropriate.

Is your concern taxes or appearances of impropriety?
posted by Candleman at 9:28 AM on December 22, 2015 [2 favorites]

There is an annual gift exclusion of $14,000 per person per year (will be the same in 2016). For amounts up to 14K, no one has to pay any taxes.

But yes, to avoid muddling the estate's finances as it goes through probate he should not give you the money out of your grandmother's accounts. (Your grandmother could give you this money, but depending on her mental state that may be a problem if any other relatives decide to kick up a fuss). Once the estate is settled and the money officially belongs to your dad, he can just write you a check.

If you need the money sooner and he has it, he can give you a personal gift of 5K from his own account and then just keep the money from the estate.
posted by The Elusive Architeuthis at 9:33 AM on December 22, 2015 [1 favorite]

FYI, even if your dad were to give you more than $14,000, he wouldn't have to pay any gift tax — while the annual gift tax exclusion amount is $14,000, exceeding that amount only entails filing a Form 709 with the IRS to *report* the amount gifted in excess of the annual exclusion, but does not necessarily entitle him to pay taxes on the gift. The gift tax doesn't actually kick in for the gifter until after they've given $5.45M (the current lifetime exclusion amount) of reported gifts (= cumulative sum of gifts exceeding annual exclusion over gifter's lifetime) to a recipient. Then the gifter only pays taxes on the amount that exceeds the lifetime exclusion.
posted by un petit cadeau at 9:36 AM on December 22, 2015 [8 favorites]

If your dad is really the co-holder of the bank accounts (account is in joint name), he owns it legally as much as your grandmother does. I believe that the bank accounts will not go through probate, will not be assets of the estate, and he could write you a check now or after your grandmother's death.
posted by Jasper Fnorde at 1:00 PM on December 23, 2015

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