Gifting to our son

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Offshore
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Gifting to our son

Post by Offshore » Tue Sep 10, 2019 7:15 pm

We have been using a Target Date account at Vanguard to hold our son's birthday money, as well as any other money he may have received over the past 18 years. Since turning 18 this summer, he can now open his own account and we would like to transfer the balance into this account in his name. We understand he can withdraw it all and blow it on stupid purchases. Let's forget about that for moment. My question is a tax question:

Can a gift of $30,000. be held in my wife's account (not a joint account) then be reported as two $15,000. gifts, one from her and the other from me? Obviously, the goal here is to not exceed federal gifting limits.

Hopefully I am making sense. Feel free to tell me the question I should be asking if I am missing something here. Thank you.

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RickBoglehead
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Re: Gifting to our son

Post by RickBoglehead » Tue Sep 10, 2019 7:23 pm

No. Your wife would need to add you to the account, or transfer half to you and then you to him.

Or file a gift tax form.

Edit - except this is not a gift...
Last edited by RickBoglehead on Wed Sep 11, 2019 4:28 pm, edited 1 time in total.
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LFS1234
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Re: Gifting to our son

Post by LFS1234 » Tue Sep 10, 2019 7:27 pm

Or gift $15K now and $15K in January 2020.

Always nice to avoid unnecessary tax filings.

TropikThunder
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Re: Gifting to our son

Post by TropikThunder » Tue Sep 10, 2019 7:28 pm

Offshore wrote:
Tue Sep 10, 2019 7:15 pm
We have been using a Target Date account at Vanguard to hold our son's birthday money, as well as any other money he may have received over the past 18 years. Since turning 18 this summer, he can now open his own account and we would like to transfer the balance into this account in his name. We understand he can withdraw it all and blow it on stupid purchases. Let's forget about that for moment. My question is a tax question:

Can a gift of $30,000. be held in my wife's account (not a joint account) then be reported as two $15,000. gifts, one from her and the other from me? Obviously, the goal here is to not exceed federal gifting limits.

Hopefully I am making sense. Feel free to tell me the question I should be asking if I am missing something here. Thank you.
You would want to file a gift tax return (Form 709) but the good news is line 12 explicitly covers this situation (emphasis added):
Gifts by husband or wife to third parties. Do you consent to have the gifts (including generation-skipping transfers) made
by you and by your spouse to third parties during the calendar year considered as made one-half by each of you?
(See
instructions.) (If the answer is “Yes,” the following information must be furnished and your spouse must sign the consent
shown below.
https://www.irs.gov/pub/irs-pdf/f709.pdf

You would just need to add your info and sign the 709 with her.

123
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Re: Gifting to our son

Post by 123 » Tue Sep 10, 2019 7:30 pm

If your son is potentially eligible for student financial aide the gift income as well as the assets could impact that. In some cases where a child remains a student parents might choose to defer gifting such assets until the child is all "grown up" (i.e. kiddee tax no longer applies and child can get capital gains tax benefits independently (a gift of securities includes the gift of the giver's basis, there is no step-up)).
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Gill
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Re: Gifting to our son

Post by Gill » Tue Sep 10, 2019 7:52 pm

From your description, this isn’t even a gift. It was his money to begin with. Don’t do anything. You were just holding it as constructive trustee for him. Just turn it over to him and file nothing.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Stinky
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Re: Gifting to our son

Post by Stinky » Wed Sep 11, 2019 8:57 am

LFS1234 wrote:
Tue Sep 10, 2019 7:27 pm
Or gift $15K now and $15K in January 2020.

Always nice to avoid unnecessary tax filings.
I like this answer. Removes any remote possibility of a tax filing.

If you'd like to string it out a little more, you could also push the final payment out to 2021, 2022, etc.
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Gill
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Re: Gifting to our son

Post by Gill » Wed Sep 11, 2019 10:56 am

Stinky wrote:
Wed Sep 11, 2019 8:57 am
LFS1234 wrote:
Tue Sep 10, 2019 7:27 pm
Or gift $15K now and $15K in January 2020.

Always nice to avoid unnecessary tax filings.
I like this answer. Removes any remote possibility of a tax filing.

If you'd like to string it out a little more, you could also push the final payment out to 2021, 2022, etc.
Did you read my post above? This isn't even a gift. He's just returning his son's money. I don't understand how everyone is treating this is a gift.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Stinky
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Re: Gifting to our son

Post by Stinky » Wed Sep 11, 2019 12:00 pm

Gill wrote:
Wed Sep 11, 2019 10:56 am
Stinky wrote:
Wed Sep 11, 2019 8:57 am
LFS1234 wrote:
Tue Sep 10, 2019 7:27 pm
Or gift $15K now and $15K in January 2020.

Always nice to avoid unnecessary tax filings.
I like this answer. Removes any remote possibility of a tax filing.

If you'd like to string it out a little more, you could also push the final payment out to 2021, 2022, etc.
Did you read my post above? This isn't even a gift. He's just returning his son's money. I don't understand how everyone is treating this is a gift.
Gill
Out of an abundance of caution, I believe that it would make sense to transfer no more than $15k per year.

It's very unlikely that IRS would ever question the transfer. And, in the unlikely event that IRS questions it, OP would have a decent shot of proving that it's just returning son's money that was being held for him.

But why not make the transfer in such a way that the IRS would have no basis for questioning it? Especially when it involves deferring part of the transfer for less than 4 months?
It's a GREAT day to be alive - Travis Tritt

Gill
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Re: Gifting to our son

Post by Gill » Wed Sep 11, 2019 12:11 pm

Stinky wrote:
Wed Sep 11, 2019 12:00 pm
Gill wrote:
Wed Sep 11, 2019 10:56 am
Stinky wrote:
Wed Sep 11, 2019 8:57 am
LFS1234 wrote:
Tue Sep 10, 2019 7:27 pm
Or gift $15K now and $15K in January 2020.

Always nice to avoid unnecessary tax filings.
I like this answer. Removes any remote possibility of a tax filing.

If you'd like to string it out a little more, you could also push the final payment out to 2021, 2022, etc.
Did you read my post above? This isn't even a gift. He's just returning his son's money. I don't understand how everyone is treating this is a gift.
Gill
Out of an abundance of caution, I believe that it would make sense to transfer no more than $15k per year.

It's very unlikely that IRS would ever question the transfer. And, in the unlikely event that IRS questions it, OP would have a decent shot of proving that it's just returning son's money that was being held for him.

But why not make the transfer in such a way that the IRS would have no basis for questioning it? Especially when it involves deferring part of the transfer for less than 4 months?
It shouldn’t have been put in the father’s name in the first place. He is just returning the funds he was holding as agent for his son. I see no need for the steps you suggest.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Stinky
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Re: Gifting to our son

Post by Stinky » Wed Sep 11, 2019 1:11 pm

Gill wrote:
Wed Sep 11, 2019 12:11 pm
Stinky wrote:
Wed Sep 11, 2019 12:00 pm
Gill wrote:
Wed Sep 11, 2019 10:56 am
Stinky wrote:
Wed Sep 11, 2019 8:57 am
LFS1234 wrote:
Tue Sep 10, 2019 7:27 pm
Or gift $15K now and $15K in January 2020.

Always nice to avoid unnecessary tax filings.
I like this answer. Removes any remote possibility of a tax filing.

If you'd like to string it out a little more, you could also push the final payment out to 2021, 2022, etc.
Did you read my post above? This isn't even a gift. He's just returning his son's money. I don't understand how everyone is treating this is a gift.
Gill
Out of an abundance of caution, I believe that it would make sense to transfer no more than $15k per year.

It's very unlikely that IRS would ever question the transfer. And, in the unlikely event that IRS questions it, OP would have a decent shot of proving that it's just returning son's money that was being held for him.

But why not make the transfer in such a way that the IRS would have no basis for questioning it? Especially when it involves deferring part of the transfer for less than 4 months?
It shouldn’t have been put in the father’s name in the first place. He is just returning the funds he was holding as agent for his son. I see no need for the steps you suggest.
Gill
Thanks for your response. I think that we see the situation a little differently, and that’s ok.

I do think that we’ve given enough information so OP can decide how to proceed.
It's a GREAT day to be alive - Travis Tritt

oldfatguy
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Re: Gifting to our son

Post by oldfatguy » Wed Sep 11, 2019 1:55 pm

Gill wrote:
Wed Sep 11, 2019 12:11 pm

It shouldn’t have been put in the father’s name in the first place.
That's my take, as well. Putting gifts to your child in your own account muddies the water and creates potential problems.

Gill
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Location: Florida

Re: Gifting to our son

Post by Gill » Wed Sep 11, 2019 3:28 pm

I look on the transaction as returning the funds to the rightful owner and therefore not a gift.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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RickBoglehead
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Re: Gifting to our son

Post by RickBoglehead » Wed Sep 11, 2019 4:27 pm

Gill wrote:
Wed Sep 11, 2019 3:28 pm
I look on the transaction as returning the funds to the rightful owner and therefore not a gift.
Gill
Absolutely. Did this with both our sons. Totals were under $10k. Added them to account, then removed ourselves.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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Offshore
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Re: Gifting to our son

Post by Offshore » Thu Sep 12, 2019 1:51 pm

Thank you for replies and discussion. Especially thankful for this pearl:
If your son is potentially eligible for student financial aide the gift income as well as the assets could impact that. In some cases where a child remains a student parents might choose to defer gifting such assets until the child is all "grown up" (i.e. kiddee tax no longer applies and child can get capital gains tax benefits independently (a gift of securities includes the gift of the giver's basis, there is no step-up)).

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