Help for small estate w/ debts: Gifting next of kin

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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icedtea
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Help for small estate w/ debts: Gifting next of kin

Post by icedtea » Sun Apr 15, 2018 12:10 pm

My girlfriend's family is evaluating their options for how their father should handle his estate. His estate assets are worth less than $75K. He owns no property, just some savings. He has many outstanding debts. She does not know the full amount he owes, but surmise it exceeds $100K. Most of the purchases that resulted in these debts stem from 3-5 years ago.

Her father would like to gift his 3 children money. We understand that a person can now gift up to $15K per calendar year to each recipient under the annual limit, and that any excess needs to be reported in form 709 to the IRS, reducing his total estate tax exemption. Since her father's estate is quite small, he will not pay any federal estate tax regardless, and he lives in CA where there is no state estate tax, according to my research.

1. How far back can creditors come after gifts to next of kin and seize them? Is there a time limit on this?

2. Would a creditor have a greater likelihood of identifying gifts if my girlfriend's father exceeds the $15K limit and reports the excess in form 709? Or would this not matter one way or the other? We are trying to understand whether there is added risk for him to gift his children over the annual limit.

Thanks,
Iced Tea

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Pajamas
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Re: Help for small estate w/ debts: Gifting next of kin

Post by Pajamas » Sun Apr 15, 2018 12:13 pm

You should consult a lawyer in California about how to approach something like this. Seems so obviously unethical to me that I don't think you should be asking about it on Bogleheads.

RudyS
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Re: Help for small estate w/ debts: Gifting next of kin

Post by RudyS » Sun Apr 15, 2018 1:47 pm

Look here: https://www.consumerhelpcentral.com/fra ... ankruptcy/
seems like 4 year look-back period. If you still think this is a good idea, I suggest you do see a lawyer.

NotWhoYouThink
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Re: Help for small estate w/ debts: Gifting next of kin

Post by NotWhoYouThink » Sun Apr 15, 2018 1:59 pm

Why are you talking about his estate while he is still alive? Is he expected to die in the next few weeks? Does he need to go to a Medicaid funded nursing home?

But if he owes money he should pay it, not give it to family.

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celia
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Re: Help for small estate w/ debts: Gifting next of kin

Post by celia » Sun Apr 15, 2018 2:12 pm

icedtea wrote:
Sun Apr 15, 2018 12:10 pm
His estate assets are worth less than $75K.
What do you mean by his "estate assets"? All his assets will have to be accounted for when he dies.

Is he married? Usually the remaining assets go to one's spouse.

If he gifts some money to others, how will he pay his bills? It seems he will just get deeper in debt very soon if he does this. That will limit his future choices (where he lives, gets medical care, transportation, etc).

delamer
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Re: Help for small estate w/ debts: Gifting next of kin

Post by delamer » Sun Apr 15, 2018 2:17 pm

If his debts are greater than his assets, then he should contact a legitimate debt counseling service.

Try nfcc.org

Grt2bOutdoors
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Re: Help for small estate w/ debts: Gifting next of kin

Post by Grt2bOutdoors » Sun Apr 15, 2018 2:35 pm

Fraudulent transfer of assets to avoid rightfully paying one's debt? That's not a gift.
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dm200
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Re: Help for small estate w/ debts: Gifting next of kin

Post by dm200 » Sun Apr 15, 2018 2:48 pm

He may very well need this money for health/medical care -

Lastrun
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Re: Help for small estate w/ debts: Gifting next of kin

Post by Lastrun » Sun Apr 15, 2018 3:10 pm

icedtea wrote:
Sun Apr 15, 2018 12:10 pm

1. How far back can creditors come after gifts to next of kin and seize them? Is there a time limit on this?

2. Would a creditor have a greater likelihood of identifying gifts if my girlfriend's father exceeds the $15K limit and reports the excess in form 709? Or would this not matter one way or the other? We are trying to understand whether there is added risk for him to gift his children over the annual limit.
Answers to questions:

1. 4 years. See 3439.09(b) of California Code.
2. It will not matter

Classic insolvency transfer under the Uniform Fraudulent Conveyance Act
Here is CA section

3439.05.
(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

The insolvency is the key here, it is per se fraudulent, the creditor(s) would not need to show intent.

See a lawyer.

One thought is to look at the family allowance after death, that may be more fruitful. Most states have some amount as a family allowance that is exempt from creditors after the death of a decedent. Children would typically be eligible for the allowance.

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LadyGeek
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Re: Help for small estate w/ debts: Gifting next of kin

Post by LadyGeek » Sun Apr 15, 2018 3:21 pm

Discussions of dishonest behavior or bypassing the law are totally unacceptable.

The approach is to educate members on how to do things legally.

The answer has been given in the previous post. This thread has run its course and is locked.
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