If you add an adult child's name to your bank account, the child's withdrawals from the account may be considered gifts. Thus if the child withdraws more than $13,000 from the bank account, you may be liable for gift taxes on the excess amount.
Adding an adult child’s name to your bank account does not result in a completed gift until the child withdraws money from that account. If the child (or sibling or other friend or relative) withdraws more than $13,000.00 from that account in a calendar year, then you must file a gift tax return.
Contrary to the joint bank account situation, adding an adult child to the deed is a complete gift at the time it is made. This is so even if you are retaining a traditional life estate in your home and giving only a remainder interest to the child. This is a taxable gift of a future interest based upon the full value of that remainder interest. If it is valued in excess of $13,000.00, then you must file a gift tax return for the year in which the child is “added to the deed”.
There is also a loss of step up at death (at least on the child's portion) according to some. Something doesn't seem quite right about the previous quote, so I will stop and wait for John to correct me.[/quote]sscritic wrote:This is so even if you are retaining a traditional life estate in your home and giving only a remainder interest to the child. This is a taxable gift of a future interest based upon the full value of that remainder interest. If it is valued in excess of $13,000.00, then you must file a gift tax return for the year in which the child is “added to the deed”.
JDCPAEsq wrote:sscritic - Am I the "John" you are referring to? ...
Noobvestor wrote:Let's say parents want to pass on their home in a more tax-efficient manner.
Is there any legitimate benefit to having the house in their kids names instead or in addition to their own names?
Peter Foley wrote:I do not know if this is an acceptable approach or not, but can't you designate a specific acount as payable on death to your children (or beneficiary for certain accounts) instead of your spouse? For example, designate your IRA (or Roth or 401k) to go to your children so as to reduce the size of the estate of the survivor? If this is allowable it would only help to address the estate tax issue for the surviving spouse, not the gifting issue you raise.
http://www.dol.gov/ebsa/faqs/faq_consum ... N4jDKXMaU4In most 401(k) plans and other defined contribution plans, the plan is written so different protections apply for surviving spouses. In general, in most defined contribution plans, if you should die before you receive your benefits, your surviving spouse will automatically receive them. If you wish to select a different beneficiary, your spouse must consent by signing a waiver, witnessed by a notary or plan representative.
Section 1457(a)(1) of the SBJPA directs the Secretary to publish sample language that can be included in a form that is used for a spouse to consent to a participant's waiver of a QJSA or QPSA. This sample language for use in spousal consent forms is contained in Notice 97-10 in this Bulletin.
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