What to do with a five figure "inherited" cash sum?

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Five
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What to do with a five figure "inherited" cash sum?

Post by Five » Sun Aug 05, 2018 12:04 am

Hi all,
I just wanted to reach out to ask a question to which I am not sure of the answer. I was recently told that a wealthy relative of mine wanted to gift me a five figure sum of money in cash that he had been saving. He is an older gentleman and is concerned about how to gift the money to me. The money was earned by him over the years with honest labor. As he has gotten older and has accumulated more financial resources, he wants to "leave" the money to me before his passing. Should I just deposit the entire amount in my bank account on one day? I am not sure how to handle this without drawing attention to myself. I plan to invest the entire amount in Vanguard via electronic transfer. Any thoughts would be appreciated. Thank you.

123
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Re: What to do with a five figure "inherited" cash sum?

Post by 123 » Sun Aug 05, 2018 12:25 am

Depositing the funds into your bank account all at once should not be a problem. You might want to try an ATM but it's possible the deposit amout might be over the limit for a deposit via some ATMs. The main problem with making a large deposit at a bank branch is that you may be asked if you have "plans" for the money, the teller would likely direct you to a financial adviser in the branch for a pitch for his financial services. You can just say you already have investment plans for the funds and hopefully be on your way.

Depending on the amount and source of the deposit there will likely be a "hold" on your ability to transfer or withdraw funds for some days. Often the deposit receipt will advise the time period for the hold.
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TxInjun
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Re: What to do with a five figure "inherited" cash sum?

Post by TxInjun » Sun Aug 05, 2018 12:48 am

I agree with 123’s concern, but it could take a lot of time (and risk) to upload cash at an atm. You seem to know what you want, you should be able to walk into your bank and deposit the cash while fending off sales pitches.

I understand that banks are required to report cash transactions above $10K to the Federal Government: you should be prepared on any paperwork in your side.

TxI

gostars
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Re: What to do with a five figure "inherited" cash sum?

Post by gostars » Sun Aug 05, 2018 1:28 am

If the amount is more than $15000 but less than $30000, it may make sense to the relative to split the gift over 2 years. Gifts in excess of the annual exclusion amount ($15000 in 2018) require the donor to file form 709 with the IRS and figure out if any taxes are owed on it. Anything up to that amount has no paperwork involved.

I would suggest spreading the cash over several smaller deposits, maybe $1000 per instance at the ATM. I believe a lot of ATMs will take 50 bills at a time, so if it's in 20s that works out nicely. Depositing large sums of cash tends to result in unwanted questions about where it came from. Plus, if you happen to get pulled over and the cops find a duffel bag full of cash in your car, they're probably going to take it (civil forfeiture) and make you prove it wasn't acquired through illegal means before you can get it back. And then there's just good old fashioned theft.

stm
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Re: What to do with a five figure "inherited" cash sum?

Post by stm » Sun Aug 05, 2018 1:43 am

I absolutely do not condone splitting up deposits as this could lead to a structuring charge. If the money was earned legitimately (and was taxed accordingly) and can be documented, just do the whole deposit and explain it for what it is. Now if it wasn't, well, then that's a different ball game :P

Five
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Re: What to do with a five figure "inherited" cash sum?

Post by Five » Sun Aug 05, 2018 5:37 am

Thank you for all the replies.

motorcyclesarecool
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Re: What to do with a five figure "inherited" cash sum?

Post by motorcyclesarecool » Sun Aug 05, 2018 7:12 am

He really can’t cut and mail you a check or two? It seems that might be far simpler and safer. If the cash came from legitimate sources, why hasn’t he deposited it to earn interest in a federally insured bank or CU account?

WHATEVER YOU DO, DO NOT BREAK UP THE DEPOSITS INTO SMALLER CHUNKS TO AVOID ANY PAPERWORK/REPORTING REQUIREMENTS. In today’s age of anti-money-laundering laws and regulations you could be considered to have committed the offense of “structuring” which could lead to great personal and financial distress.

The financial crime and “civil forfeiture” laws are almost to the point of being guilty until proven innocent. Great Uncle Albert wants to give you the cash out of his mattress and won’t cut a check? First, make sure he’s not D.B. Cooper. Then, make a single large deposit in person at the branch, answer all their questions truthfully, smile for the camera, and don’t do anything stupid like wiring the money offshore. But, to avoid any possible problems, pay an estate attorney for an hour of her time to get solid counsel before receiving the gift. Advice from the internet should not be relied on when the laws around cash movement are so draconian.
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Five
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Re: What to do with a five figure "inherited" cash sum?

Post by Five » Sun Aug 05, 2018 9:42 am

Thank you motorcyclesarecool for your response. The money is in cash only because this elderly gentleman is a member of the "greatest generation" who lived through the horrors of WWII and other atrocities and always felt that some money should always be in cash and close by in case there were problems with the banks or federal government. No crimes were committed and no dishonesty is involved. He worked, got paid, paid legitimate taxes on the money and saved some money from his pay for many years. He kept it close by and now wants to make a gift since he is older and doesn't need it as he did when he was younger. I am a relative who has done many good things for him and he wants to be kind. That is it.....no "bad behavior" is involved. The money was already taxed honestly and he wants to make a gift. Thank you.

gotester2000
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Re: What to do with a five figure "inherited" cash sum?

Post by gotester2000 » Sun Aug 05, 2018 10:39 am

Five figure is anything between 10000-99999.
If its closer to the lower end then it is no problem - deposit in your account or pay your daily expenses in cash for sometime. If its closer to higher end ask the gentleman to deposit in his own account and cut you a check.

Gill
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Re: What to do with a five figure "inherited" cash sum?

Post by Gill » Sun Aug 05, 2018 10:44 am

There really is no problem as the OP describes the situation. If he wants to give you cash, take the cash and don't make it difficult for him. Either keep it in the form of cash or deposit it with the realization the bank will file a government form if $10,000 or more. This form will have no impact on either one of you.
Gill

Five
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Re: What to do with a five figure "inherited" cash sum?

Post by Five » Sun Aug 05, 2018 3:35 pm

Thank you all for your responses!

aristotelian
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Re: What to do with a five figure "inherited" cash sum?

Post by aristotelian » Sun Aug 05, 2018 4:01 pm

I would be worried about accepting a cash gift that he is not reporting. Is it over $15k? If so, he should be filling out a tax forem. Even though it would not cost him anything in tax, it should count against his lifetime exemption and the IRS will want to know about it.

If he isn't going to report it, the safest thing may be to take the cash and keep it in cash, spending it as soon as possible.
Last edited by aristotelian on Sun Aug 05, 2018 4:35 pm, edited 1 time in total.

SagaciousTraveler
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Re: What to do with a five figure "inherited" cash sum?

Post by SagaciousTraveler » Sun Aug 05, 2018 4:24 pm

I would advise to NEVER deposit large amounts of CASH or a CHECK into an ATM.

Here is just a sample of why but you can also google horror stories if you want:

https://www.thebalance.com/deposits-at- ... sks-315797

FBN2014
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Re: What to do with a five figure "inherited" cash sum?

Post by FBN2014 » Sun Aug 05, 2018 11:47 pm

As mentioned before, DO NOT split the cash up into smaller amounts and then do multiple deposits. This could result in you being charged with a crime called structuring. Just make the deposit all at once. If the amount is over the yearly exclusion then fill out a gift tax return and have your relative sign it. No tax is collected but a filing is required.
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vineviz
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Re: What to do with a five figure "inherited" cash sum?

Post by vineviz » Sun Aug 05, 2018 11:53 pm

FBN2014 wrote:
Sun Aug 05, 2018 11:47 pm
As mentioned before, DO NOT split the cash up into smaller amounts and then do multiple deposits. This could result in you being charged with a crime called structuring. Just make the deposit all at once. If the amount is over the yearly exclusion then fill out a gift tax return and have your relative sign it. No tax is collected but a filing is required.
To reiterate, the relative MUST declare the gift or else the OP will owe income tax on the money.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

NotWhoYouThink
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Re: What to do with a five figure "inherited" cash sum?

Post by NotWhoYouThink » Mon Aug 06, 2018 7:25 am

vineviz wrote:
Sun Aug 05, 2018 11:53 pm
FBN2014 wrote:
Sun Aug 05, 2018 11:47 pm
As mentioned before, DO NOT split the cash up into smaller amounts and then do multiple deposits. This could result in you being charged with a crime called structuring. Just make the deposit all at once. If the amount is over the yearly exclusion then fill out a gift tax return and have your relative sign it. No tax is collected but a filing is required.
To reiterate, the relative MUST declare the gift or else the OP will owe income tax on the money.
I'll go first: NO

The relative should declare the gift, although it is unlikely that his estate will be large enough to owe federal estate tax. But whether he reports it or not is not OP's responsibility, and OP will under no circumstances owe tax on a gift received.

NotWhoYouThink
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Re: What to do with a five figure "inherited" cash sum?

Post by NotWhoYouThink » Mon Aug 06, 2018 7:28 am

aristotelian wrote:
Sun Aug 05, 2018 4:01 pm
I would be worried about accepting a cash gift that he is not reporting. Is it over $15k? If so, he should be filling out a tax forem. Even though it would not cost him anything in tax, it should count against his lifetime exemption and the IRS will want to know about it.

If he isn't going to report it, the safest thing may be to take the cash and keep it in cash, spending it as soon as possible.
Again, no. It is a bad idea for the relative to be holding this much cash at his home, and it would be a bad idea for OP to continue holding that much cash. But whether or not the donor properly declares his gift, the recipient should deposit it into his bank immediately and with no fear of trouble. Because receiving a gift is perfectly legal.

The bank will ask some questions and fill out some forms if the amount is more than $10,000. Answer the questions. That's all there is to it.

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vineviz
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Re: What to do with a five figure "inherited" cash sum?

Post by vineviz » Mon Aug 06, 2018 8:51 am

NotWhoYouThink wrote:
Mon Aug 06, 2018 7:25 am
vineviz wrote:
Sun Aug 05, 2018 11:53 pm
FBN2014 wrote:
Sun Aug 05, 2018 11:47 pm
As mentioned before, DO NOT split the cash up into smaller amounts and then do multiple deposits. This could result in you being charged with a crime called structuring. Just make the deposit all at once. If the amount is over the yearly exclusion then fill out a gift tax return and have your relative sign it. No tax is collected but a filing is required.
To reiterate, the relative MUST declare the gift or else the OP will owe income tax on the money.
I'll go first: NO

The relative should declare the gift, although it is unlikely that his estate will be large enough to owe federal estate tax. But whether he reports it or not is not OP's responsibility, and OP will under no circumstances owe tax on a gift received.
If the relative doesn't declare it as a gift, then it isn't technically a gift: it is taxable as income to the recipient UNLESS the recipient can document that it was a gift. How would they readily do that in the absence of a gift tax return from the relative?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Gill
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Re: What to do with a five figure "inherited" cash sum?

Post by Gill » Mon Aug 06, 2018 8:59 am

vineviz wrote:
Sun Aug 05, 2018 11:53 pm
To reiterate, the relative MUST declare the gift or else the OP will owe income tax on the money.
That's nonsense. It will not be income to the OP regardless of whether the relative reports it is a gift.
Gill

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vineviz
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Re: What to do with a five figure "inherited" cash sum?

Post by vineviz » Mon Aug 06, 2018 9:02 am

Gill wrote:
Mon Aug 06, 2018 8:59 am
vineviz wrote:
Sun Aug 05, 2018 11:53 pm
To reiterate, the relative MUST declare the gift or else the OP will owe income tax on the money.
That's nonsense. It will not be income to the OP regardless of whether the relative reports it is a gift.
Gill
It might be nonsense, but it is the law.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Gill
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Re: What to do with a five figure "inherited" cash sum?

Post by Gill » Mon Aug 06, 2018 9:06 am

vineviz wrote:
Mon Aug 06, 2018 9:02 am
Gill wrote:
Mon Aug 06, 2018 8:59 am
vineviz wrote:
Sun Aug 05, 2018 11:53 pm
To reiterate, the relative MUST declare the gift or else the OP will owe income tax on the money.
That's nonsense. It will not be income to the OP regardless of whether the relative reports it is a gift.
Gill
It might be nonsense, but it is the law.
That's interesting. Could you give me a citation please? I'm an attorney and a CPA and was not aware of this. :happy
Gill

nodenuff2
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Re: What to do with a five figure "inherited" cash sum?

Post by nodenuff2 » Mon Aug 06, 2018 9:18 am

Go visit and leave with the cash. Put it in a bank lock box. Every once in a while replace and spend one of the old bills. You will get the strangest looks. Some young folks have never seen old money.
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NancyABQ
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Re: What to do with a five figure "inherited" cash sum?

Post by NancyABQ » Mon Aug 06, 2018 9:22 am

As a gift it wouldn't be taxable to the recipient, but I would recommend getting a letter from the relative documenting that it is a gift. That's just in case any question of what the source is comes up. The larger the amount, the more important it would be to get that letter.

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vineviz
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Re: What to do with a five figure "inherited" cash sum?

Post by vineviz » Mon Aug 06, 2018 9:36 am

Gill wrote:
Mon Aug 06, 2018 9:06 am
vineviz wrote:
Mon Aug 06, 2018 9:02 am
Gill wrote:
Mon Aug 06, 2018 8:59 am
vineviz wrote:
Sun Aug 05, 2018 11:53 pm
To reiterate, the relative MUST declare the gift or else the OP will owe income tax on the money.
That's nonsense. It will not be income to the OP regardless of whether the relative reports it is a gift.
Gill
It might be nonsense, but it is the law.
That's interesting. Could you give me a citation please? I'm an attorney and a CPA and was not aware of this. :happy
Gill
Income is taxable unless is it specifically exempt from taxation.

One of the specifically exempt types of income is a gift, right? But if the gift is not documented by the donor as a gift then it's technically unreported income.

In a challenge by the IRS it would be up to the recipient to document that the money was a gift and not taxable income. In reality, the likelihood of an audit is pretty low and proving it was a gift might be very easy to do (if for instance the cancelled check said "gift" on the memo line). On the other hand, proving the money was a gift would be substantially harder if the transfer was over $10k and was made entirely in currency.

Imagine you had a client with an annual income of, say, $30k/year and their bank account balance instantaneously ballooned from $2k to $52k without any associated filing with the IRS. Wouldn't you advise them that they are at an elevated risk for an SAR-triggered inquiry or even audit? Wouldn't you caution them to double check that the donor had their tax ducks in a row?
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aristotelian
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Re: What to do with a five figure "inherited" cash sum?

Post by aristotelian » Mon Aug 06, 2018 9:55 am

vineviz wrote:
Mon Aug 06, 2018 9:36 am


Income is taxable unless is it specifically exempt from taxation.

One of the specifically exempt types of income is a gift, right? But if the gift is not documented by the donor as a gift then it's technically unreported income.

In a challenge by the IRS it would be up to the recipient to document that the money was a gift and not taxable income. In reality, the likelihood of an audit is pretty low and proving it was a gift might be very easy to do (if for instance the cancelled check said "gift" on the memo line). On the other hand, proving the money was a gift would be substantially harder if the transfer was over $10k and was made entirely in currency.

Imagine you had a client with an annual income of, say, $30k/year and their bank account balance instantaneously ballooned from $2k to $52k without any associated filing with the IRS. Wouldn't you advise them that they are at an elevated risk for an SAR-triggered inquiry or even audit? Wouldn't you caution them to double check that the donor had their tax ducks in a row?
The question is whether a gift is "income". The only one who has a duty to report it is the benefactor to make sure he is within his lifetime exemption, and that is only if it is more than $15K.

I do agree, I would be concerned about audit risk, but it would be the benefactor that would potentially get in trouble. The problem is it sounds like this guy refuses to have a paper trail, so if you want to protect him, do you refuse the gift?

Gill
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Re: What to do with a five figure "inherited" cash sum?

Post by Gill » Mon Aug 06, 2018 10:06 am

Aren't we making mountains out of molehills? My advice to OP is take the cash and deposit it in the bank.
Gill

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vineviz
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Re: What to do with a five figure "inherited" cash sum?

Post by vineviz » Mon Aug 06, 2018 10:36 am

aristotelian wrote:
Mon Aug 06, 2018 9:55 am
vineviz wrote:
Mon Aug 06, 2018 9:36 am


Income is taxable unless is it specifically exempt from taxation.

One of the specifically exempt types of income is a gift, right? But if the gift is not documented by the donor as a gift then it's technically unreported income.

In a challenge by the IRS it would be up to the recipient to document that the money was a gift and not taxable income. In reality, the likelihood of an audit is pretty low and proving it was a gift might be very easy to do (if for instance the cancelled check said "gift" on the memo line). On the other hand, proving the money was a gift would be substantially harder if the transfer was over $10k and was made entirely in currency.

Imagine you had a client with an annual income of, say, $30k/year and their bank account balance instantaneously ballooned from $2k to $52k without any associated filing with the IRS. Wouldn't you advise them that they are at an elevated risk for an SAR-triggered inquiry or even audit? Wouldn't you caution them to double check that the donor had their tax ducks in a row?
The question is whether a gift is "income". The only one who has a duty to report it is the benefactor to make sure he is within his lifetime exemption, and that is only if it is more than $15K.

I do agree, I would be concerned about audit risk, but it would be the benefactor that would potentially get in trouble. The problem is it sounds like this guy refuses to have a paper trail, so if you want to protect him, do you refuse the gift?
I agree with Gill that we've probably gotten too deep in the weeds on this but it's not quite true that "it would be the benefactor that would potentially get in trouble". The IRS instructions for form 709 state that if the donor doesn't pay the gift tax then the recipient must.

In this case there SHOULD NOT be any tax because the gift is possibly below the annual exclusion and also probably below the donor's lifetime limit. But if the donor adamantly and stubbornly refused to engage with the IRS on this question, I'm not sure that the recipient wouldn't have at least some chance on being on the hook for taxes.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Gill
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Re: What to do with a five figure "inherited" cash sum?

Post by Gill » Mon Aug 06, 2018 12:18 pm

vineviz wrote:
Mon Aug 06, 2018 10:36 am
But if the donor adamantly and stubbornly refused to engage with the IRS on this question, I'm not sure that the recipient wouldn't have at least some chance on being on the hook for taxes.
There are no taxes due. I don't understand the concern here.
Gill

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Re: What to do with a five figure "inherited" cash sum?

Post by gostars » Mon Aug 06, 2018 11:14 pm

I retract my suggestion of depositing the money a bit at a time to avoid paperwork. Wasn't even aware that was illegal. What's next, you can't tip in cash because bartenders might not report it on their taxes?

Five
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Re: What to do with a five figure "inherited" cash sum?

Post by Five » Tue Aug 07, 2018 5:31 pm

Thank you all for your responses. This post and the many respondents have caused me to do a lot of thinking. For example, we are not a free to do what we want as one would think.....or led to believe....if you deposit cash of $10,000 or more, the bank (according to the Bank Secrecy Act), has to report that to the IRS. People are not as free to do whatever they want with their cash as I thought. Now there may be an audit.
Also, what about people such as painters, lawn cutters and landscapers, waiters/waitresses who rake in houndreds of dollars each night in tips, teens and early 20's adults who have small businesses based on cash, people who received wedding or graduation gifts in cash.....how do they make their deposits? Businessmen.....for themselves and also to pay their employees? I have heard of people who do handyman work, painting, lawn care, etc. offer a lower rate to their clientele if they "pay in cash". So if they go the bank and deposit $2,000 several times over the course of a few weeks, are they "structuring"? Will the IRS audit them? Yet they survive and pay their employees with checks based on their cash deposits. Interesting.

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Re: What to do with a five figure "inherited" cash sum?

Post by simas » Tue Aug 07, 2018 7:24 pm

Five wrote:
Tue Aug 07, 2018 5:31 pm
if you deposit cash of $10,000 or more, the bank (according to the Bank Secrecy Act), has to report that to the IRS.
So? what is the concern? it is form that gets filled out and you are clear.
Five wrote:
Tue Aug 07, 2018 5:31 pm
Now there may be an audit.
So? again, what is the problem? more than a million people get audit every year in US by IRS . the number of notices sent out is even larger - I had many over the years , you send in response/documentation for the notice and it is solved.

Five wrote:
Tue Aug 07, 2018 5:31 pm
their deposits? Businessmen.....for themselves and also to pay their employees? I have heard of people who do handyman work, painting, lawn care, etc. offer a lower rate to their clientele if they "pay in cash". So if they go the bank and deposit $2,000 several times over the course of a few weeks, are they "structuring"? Will the IRS audit them? Yet they survive and pay their employees with checks based on their cash deposits. Interesting.
again, you may be concerned about nothing since you are completely clear in funds - however, if you intentionally try to avoid Bank Secrecy Act you are acting against your self interest (and being extremely unwise quiet frankly). Same way businesses, waiters, etc deposit cash just fine, and get formed filled out just fine if they are above certain amount. dont be stupid with this, I do not know how else to say this..

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Re: What to do with a five figure "inherited" cash sum?

Post by ColoRetiredGirl » Tue Aug 07, 2018 7:45 pm

stm wrote:
Sun Aug 05, 2018 1:43 am
I absolutely do not condone splitting up deposits as this could lead to a structuring charge. If the money was earned legitimately (and was taxed accordingly) and can be documented, just do the whole deposit and explain it for what it is. Now if it wasn't, well, then that's a different ball game :P
stm is correct. Not only is the bank required to complete a CTR report for deposits over $10,000, they record deposits of $3,000 and reviews the reports for structuring or abnormal activity over a period of time. You are better off just following the ‘gift’ IRS requirements.

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Re: What to do with a five figure "inherited" cash sum?

Post by GrowthSeeker » Tue Aug 07, 2018 9:02 pm

You also need to discuss with the relative who may or may not be aware of the gift tax regulations and who may or may not want to split the gift into smaller chunks over a period of time, possibly over more than one year. How does the donor relative want to handle this?

As far as the banking regulations on cash deposits over a certain amount (and I think it is even check deposits over a certain amount): if the amount is 9 times that limit and you split it into 10 different deposits I think they are going to notice that. But if the amount is smaller and you split it into 2 or 3 different size deposits separated in time, perhaps over many months and into the next year, how are they going to notice that? Aren't US citizens allowed to have a garage sale or sell a family heirloom for cash? Have the Feds really become that totalitarian?
(Hint: look at my signature below to guess what my answer is to that question).
Just because you're paranoid doesn't mean they're NOT out to get you.

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