considerations for helping kids/parents with expenses

[feh]

Let's say you wanted to help a parent or child with routine expenses (rent/mortgage/groceries/insurance).

Is there a best way to do this with respect to taxes or other considerations? Or is it simply a matter of handing them a check?

Thanks.

[JoeRetire]

Just hand them a check.

[HomeStretch]

You can gift up to $15k in 2020 to each donee without having to report the gift on Form 709. If you are married, you and spouse can each gift $15k.

[feh]

You can gift up to $15k in 2020 to each donee without having to report the gift on Form 709. If you are married, you and spouse can each gift $15k.

To that end, there's nothing formal about such a gift, right? It's just giving them money?

[MathIsMyWayr]

Aren't tuition or medical expenses including health insurance paid directly to the providers exempt from tax reporting?

[feh]

Aren't tuition or medical expenses including health insurance paid directly to the providers exempt from tax reporting?

Yes, they are (I read that earlier).

But, let's assume the gift is less than $15K for the year. Nothing special to do?

[MathIsMyWayr]

Aren't tuition or medical expenses including health insurance paid directly to the providers exempt from tax reporting?

Yes, they are (I read that earlier).

But, let's assume the gift is less than $15K for the year. Nothing special to do?

Nothing. Actually I give my son stocks just under the limit to avoid the hassle of paperwork when its price is down.

[HomeStretch]

You can gift up to $15k in 2020 to each donee without having to report the gift on Form 709. If you are married, you and spouse can each gift $15k.

To that end, there's nothing formal about such a gift, right? It's just giving them money?

Yes, there is nothing formal. I use appreciated stock for gifts to my kids which works out well as their tax rate is lower.

You mentioned giving for specific purposes (rent, etc.). You could pay the rent, for example, directly to the landlord (without being on the lease!) if you have any concern about your gift being used for other purposes by a spendthrift donee.

[humblecoder]

If the person receiving the gift is on SSI, the gift could negatively impact their eligibility for benefits.

This may not apply to the OP, but I am mentioning it in case it applies to anybody who might be reading this thread.

[SnowBog]

You can gift up to $15k in 2020 to each donee without having to report the gift on Form 709. If you are married, you and spouse can each gift $15k.

And as I understand it, if you are married and the person receiving the gift is married, I believe each donee spouse can give $15k/year to each recipient spouse. Combined, that's $60k/year from one couple to another.

[SnowBog]

You can gift up to $15k in 2020 to each donee without having to report the gift on Form 709. If you are married, you and spouse can each gift $15k.

To that end, there's nothing formal about such a gift, right? It's just giving them money?

Yes, there is nothing formal. I use appreciated stock for gifts to my kids which works out well as their tax rate is lower.

While nothing formal is required, it's maybe worth keeping a paper trail just in case...

Many years back, we gifted a large amount to in-laws who were self-employed and had unexpectedly low income due to health issues (and inadequate insurance). On the personal check, we noted that it was a personal gift.

Come tax time, their account doing their business taxes was trying to reconcile the amount gifted. They assumed that must be "business income" (as historically anything coming into the accounts [shared personal/business accounts] was business income. Getting them a copy of the canceled check resolved any issues/questions.

[SnowBog]

If the person receiving the gift is on SSI, the gift could negatively impact their eligibility for benefits.

This may not apply to the OP, but I am mentioning it in case it applies to anybody who might be reading this thread.

The "timing" may also be relevant...

I vaguely remember when we purchased our home 20 years ago that we were STRONGLY advised not to accept any large "gifts" in the months leading up to closing. I don't remember the specifics, but my recollection is even if it was clearly a "gift" that could throw off their income verification/qualifications for the loan. That wasn't a problem for us, but I remember how strongly they re-enforced not having any large incoming deposits not tied to reported wages...

This might also be an issue with "background checks" or other items that look into your personal finances...

Lastly, I vaguely recall something in a sample estate plan referencing any "gifts" made during lifetime being counted as an "advance" against future inheritance (or not). Presumably if you were giving to 1+ heir during your life, but not all heirs, this could reconcile both (or make clear "gifts" didn't impact the rest of your will).

But as I noted previously, having at least some (even if informal) records that these are gifts might help at some point...

[prairieman]

If the person receiving the gift is on SSI, the gift could negatively impact their eligibility for benefits.

This may not apply to the OP, but I am mentioning it in case it applies to anybody who might be reading this thread.

The "timing" may also be relevant...

I vaguely remember when we purchased our home 20 years ago that we were STRONGLY advised not to accept any large "gifts" in the months leading up to closing. I don't remember the specifics, but my recollection is even if it was clearly a "gift" that could throw off their income verification/qualifications for the loan. That wasn't a problem for us, but I remember how strongly they re-enforced not having any large incoming deposits not tied to reported wages...

This might also be an issue with "background checks" or other items that look into your personal finances...

Lastly, I vaguely recall something in a sample estate plan referencing any "gifts" made during lifetime being counted as an "advance" against future inheritance (or not). Presumably if you were giving to 1+ heir during your life, but not all heirs, this could reconcile both (or make clear "gifts" didn't impact the rest of your will).

But as I noted previously, having at least some (even if informal) records that these are gifts might help at some point...

We’ve been through that and we’re able to navigate the situation with a gift letter - stating clearly that nothing was required in return.

[stan1]

I help support my mom. I have it set up to do a payroll allotment so the funds go directly to her checking account. She is 87 so getting a paper check would be a big inconvenience for her. You could also use a service like Zelle to avoid paper checks.