Unknown financial gift from relative

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Submariner1980
Posts: 81
Joined: Thu Feb 18, 2010 2:36 pm

Unknown financial gift from relative

Post by Submariner1980 » Thu Oct 11, 2018 6:57 pm

My wife and I have a delicate family situation, and would like Boglehead input on how to proceed.

Earlier this year, my wife's grandmother decided to make an unknown investment, for an unknown amount, for each of her grandchildren (my wife and each of her cousins). We appreciate the thought behind the gift, however:

1 - We have not received any paperwork/prospectus/documentation on what financial product/instrument this investment is.
2 - Grandmother went through the "financial guy" that everyone in the small community uses. He is not a financial planner/CFP - he is a life insurance salesman.
3 - We believe each gift is in the respective grandchild's name, as her parents said they passed on my wife's SSN and birthdate to use when her "investment" was made.
4 - My wife's parents have mentioned that the product is an annuity. Not sure how true that is, as they are not very financially literate.
5 - If it is indeed an annuity, I question the appropriateness of the salesman recommending that product as a gift for people in their late 20's/early 30's.

I'm concerned that there is something floating out there in my wife's name, with tax implications for me and my wife, that we know nothing about. I do not want to appear ungrateful for the well-meaning gift, but have worries that the gift may have been executed poorly with ramifications on us. I don't want to be surprised with a tax document in January, or worse, a IRS letter 3 years from now requesting back taxes, penalties, and interest.
How would you recommend we proceed? What questions should we be asking? My initial thoughts:

1 - We should contact the life insurance salesman directly and request information. Neither me nor my wife have ever met or talked with him before, but we can get name and contact info from in-laws. However, not 100% certain that the gift is even in my wife's name.
2 - Should it turn out to be a complicated annuity bundled in some sort of whole-life product, would it be inappropriate to get the money out and put it in our Boglehead portfolio?
3 - Again, if it is a complicated product that netted the salesman a nice commission at the expense of a 70+ year old grandmother, do we let the other cousins know?

Any thoughts or suggested courses of action would be appreciated. Thank you.

Bruce T
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Joined: Wed Mar 28, 2018 8:34 pm

Re: Unknown financial gift from relative

Post by Bruce T » Thu Oct 11, 2018 7:20 pm

I would not sweat the ramifications until you get the facts.

Relative to "getting the facts" ... if you can ascertain that the gift setup has actually been completed and that you are intended to know about it (possibly you are intended to receive it at the holidays??) , then you might try "we appreciate the thoughtfulness but wanted to make you aware that there has been no information regarding the matter provided to us: we both want to make sure that you <grandma> have not been taken advantage in the process and that, if there are any steps we need to take to take custody of the gift or to ensure that its properly handled, that we get the info for that".

Just a thought!

Good luck!

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Mlm
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Joined: Sat Apr 09, 2016 6:00 pm

Re: Unknown financial gift from relative

Post by Mlm » Thu Oct 11, 2018 7:25 pm

I think it depends on how you found out about the intended gift. Are you sure its a done deal?

ResearchMed
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Joined: Fri Dec 26, 2008 11:25 pm

Re: Unknown financial gift from relative

Post by ResearchMed » Thu Oct 11, 2018 7:28 pm

Bruce T wrote:
Thu Oct 11, 2018 7:20 pm
I would not sweat the ramifications until you get the facts.

Relative to "getting the facts" ... if you can ascertain that the gift setup has actually been completed and that you are intended to know about it (possibly you are intended to receive it at the holidays??) , then you might try "we appreciate the thoughtfulness but wanted to make you aware that there has been no information regarding the matter provided to us: we both want to make sure that you <grandma> have not been taken advantage in the process and that, if there are any steps we need to take to take custody of the gift or to ensure that its properly handled, that we get the info for that".

Just a thought!

Good luck!
I might try to get the above described info, but not using those words.

You can't really suggest to Grandma that she may have been "taken advantage of", not in those words, or not using those words AND being tactful.

As for the latter part, I'd suggest focusing only on something like " [how grateful we both are, how generous this was, etc. and some more etc. :wink: ] and our only concern is that IF anything is now in <name>'s name, we'd want to make sure there are no tax issues we need to deal with..." Or maybe just "... are there any tax issues we should be taking care of?"

This IS Grandma's money, right?
If she isn't asking for assistance, then I'm not sure how much say you - the recipient(s) - have in any of this.
Yes, it would be very unfortunate if she HAS been "taken advantage of", and if "the guy" is an insurance salesman, well... that's what they usually "do". And it happens all the time, and not just to generous grandparents.

Backing up, how did you find out about this, and did Grandma want you to find out now?

RM
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LeeMKE
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Joined: Mon Oct 14, 2013 9:40 pm

Re: Unknown financial gift from relative

Post by LeeMKE » Thu Oct 11, 2018 7:46 pm

May I suggest that the gift is not your concern until received, and at that point you can decide how to handle the gift, even gifting it again to charity if the tax burden is a problem for you.

I am not as old as grandma, but am giving small gifts to the children in my husband's family at birthdays, etc. The parents want to control these gifts, preferring that I give consumables or cash they can spend right away. But I'm giving Savings bonds, purposely to keep the money locked up until the kids are older. Over time, the pot will be a few thousand for each child, and my hope is they will keep it saved/invested until they are going to college, or better yet, until retirement. I've heard explanations about how I shouldn't do this, I should do something else. But to be honest, it is my money, and if they don't want the gift, I have charities that will put it to better use than what the parents are doing with their cash today.

Of the four young families receiving gifts:
One is very happy to be receiving these for their kids - they are also good savers themselves.
Another was disgruntled until Mom saw a post from me on Facebook about small children's accounts growing over 60 years to over a million. Now Mom is enthused.
Another is well intended, and gracious about accepting the gifts, but I know she'd rather receive cash they can spend now. But she's not rude enough to suggest otherwise.
And the last is completely uncooperative, instead opened a bank account for the kids that I should deposit the gifts in, so for the time being I'm just buying the bonds in a gift account and they won't go into the kids accounts until someday when Parents or young adults open the Treasury Direct account to receive the bonds. This couple is telling everyone I'm crazy for investing in savings bonds for their kids. But a) I'm FI and they are unlikely to ever be. and b) it's my money.

FWIW
Lee
The mightiest Oak is just a nut who stayed the course.

JBTX
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Re: Unknown financial gift from relative

Post by JBTX » Thu Oct 11, 2018 7:54 pm

I wouldn't think it would be possible to change ownership of an investment to somebody (via gift or anything else) and it not be known to the new owners very quickly. I would think you would get statements or other information in the mail.

At one level it is irritating when a financial gift is given that is completely against your philosophy and is highly inefficient. But I would think in almost all cases the value of the gift is more than the additional tax it may cause you due to inefficiency or tax benefit phase outs.

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8foot7
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Re: Unknown financial gift from relative

Post by 8foot7 » Thu Oct 11, 2018 8:05 pm

I would not be super enthusiastic if people were opening Ccounts in my childrens’ names using their social security numbers without my knowledge or consent, and I would probably ask that the practice stop at the existing gift.

However, I don’t think you have much of a leg to stand in unless and until these unknown gifts begin having negative implications for you, at which point you could just politely explain that you appreciate the gift and the generosity but it is having surely unintended consequences and here is what you intend to do as guardian to rectify...

EDIT: I guess I misread. So your wife’s parents provided her personal information without your wife’s knowledge to your wife’s grandmother so that an account could be set up for her? That feels...wrong.

I’d have your wife get in touch with the “money guy” — if the accounts are truly in her name then he can’t not give her the details, can he? Then she can act to move the money or whatever needs to be done.

delamer
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Re: Unknown financial gift from relative

Post by delamer » Thu Oct 11, 2018 8:18 pm

ResearchMed wrote:
Thu Oct 11, 2018 7:28 pm
Bruce T wrote:
Thu Oct 11, 2018 7:20 pm
I would not sweat the ramifications until you get the facts.

Relative to "getting the facts" ... if you can ascertain that the gift setup has actually been completed and that you are intended to know about it (possibly you are intended to receive it at the holidays??) , then you might try "we appreciate the thoughtfulness but wanted to make you aware that there has been no information regarding the matter provided to us: we both want to make sure that you <grandma> have not been taken advantage in the process and that, if there are any steps we need to take to take custody of the gift or to ensure that its properly handled, that we get the info for that".

Just a thought!

Good luck!
I might try to get the above described info, but not using those words.

You can't really suggest to Grandma that she may have been "taken advantage of", not in those words, or not using those words AND being tactful.

As for the latter part, I'd suggest focusing only on something like " [how grateful we both are, how generous this was, etc. and some more etc. :wink: ] and our only concern is that IF anything is now in <name>'s name, we'd want to make sure there are no tax issues we need to deal with..." Or maybe just "... are there any tax issues we should be taking care of?"

This IS Grandma's money, right?
If she isn't asking for assistance, then I'm not sure how much say you - the recipient(s) - have in any of this.
Yes, it would be very unfortunate if she HAS been "taken advantage of", and if "the guy" is an insurance salesman, well... that's what they usually "do". And it happens all the time, and not just to generous grandparents.

Backing up, how did you find out about this, and did Grandma want you to find out now?

RM
I agree; have your wife — not you, since it isn’t a gift to you — thank her grandmother and ask for the salesman’s contact information. Wife tells grandmother, truthfully, it is to make sure wife isn’t doing your taxes wrong.

It could be something as simple as a “payable on death” account with your wife as one beneficiary, and with no current tax implications for you.

Otherwise, it is up to your grandmother-in-law how she wants to handle this. If she isn’t being impoverished or defrauded, then these are her choices.

123
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Joined: Fri Oct 12, 2012 3:55 pm

Re: Unknown financial gift from relative

Post by 123 » Thu Oct 11, 2018 8:35 pm

If the financial gift is an annuity there is no tax issue until a distribution is made so there may not be anything to be concerned about for a long, long, time (perhaps a gift annuity might be structured to begin distributions to the beneficiary at some kind of retirement age like 60, 62. 65, 70 etc).

To be a little diabolical perhaps a financial gift for your wife could be a life insurance policy on you (your wife would be the beneficiary). (I don't know if state law would permit someone else to initiate a policy of this type).
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