Taxes? Legal Issues? Grandmother sent large check to Cousin she's estranged from

[Zillions]

CLARIFICATION: My cousin's husband is Asian, not black. I am so sorry, I did not intend to make this about race relations. I only mentioned that she is an inter-racial marriage to give some background to the situation.

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My cousin was cut off by our grandparents. She's persona non grata and Grandma even sent her a nasty letter several years ago, telling her she's been disinherited.

My cousin's husband lost his job in March and in April, a large (high 5 figures) check arrived in the mail, made out to cousin. The memo clearly stated "(COUSIN'S LAST NAME) FAMILY STARVATION PREVENTION FUND" (in caps) written in Grandma's distinctive handwriting and signed & dated by her. When cousin called our grandfather, he confirmed that the check was "not a joke" as "Nana does not joke" and that she had sent it out after learning - through another cousin - that Cousin was in the danger of losing her home. He further stated that she should keep the money (the check was drawn on their joint account). Grandma refused to talk to Cousin on the phone.

Cousin has not cashed this check. They are living off their savings and she doesn't know what to do. What would you advice her? BTW, although very elderly, my grandmother is physically & mentally healthy & alert and was in full possession of her senses when she sent this large check out to a granddaughter she has not spoken to for over 10 years and refuses to speak to even today!

[mortfree]

Mail it back to me

In before the lock(?)

[oldfort]

This thread seems headed for a lock. This is more of a relationship issue than a financial issue. From a purely financial perspective, the obvious answer is cash the check.

[Raymond]

Is there a non-monetary price your cousin will have to pay for cashing the check, i.e., will she have to listen to her grandmother go on and on to the other relatives about saving her and her husband from the poorhouse, or other snarkiness?

[Zillions]

Why should this thread be locked? My cousin is worried because of potential tax implications as the amount is a large 5 figure, and if this qualifies as a gift or not.

[nalor511]

Why should this thread be locked? My cousin is worried because of potential tax implications as the amount is a large 5 figure, and if this qualifies as a gift or not.

It's a gift, no tax implications for receiver, regardless the amount

[mortfree]

Taxes are dealt with by the giver

[Zillions]

Is there a non-monetary price your cousin will have to pay for cashing the check, i.e., will she have to listen to her grandmother go on and on to the other relatives about saving her and her husband from the poorhouse, or other snarkiness?

She doesn't care about Grandma's snarkiness as she's not allowed around her anymore. What concerns her is why this check was sent after years of ostracism and if there's anything she should be aware of - legally & tax wise - before cashing the check?

[Zillions]

Why should this thread be locked? My cousin is worried because of potential tax implications as the amount is a large 5 figure, and if this qualifies as a gift or not.

It's a gift, no tax implications for receiver, regardless the amount

Can Grandma later claim it's a loan?

[vineviz]

My cousin is in a mixed race marriage and was cut off by our grandparents as a result. She's persona non grata and Grandma even sent her a nasty letter several years ago, telling her she's been disinherited.

My cousin's husband lost his job in March and in April, a large (high 5 figures) check arrived in the mail, made out to cousin. The memo clearly stated "(COUSIN'S LAST NAME) FAMILY STARVATION PREVENTION FUND" (in caps) written in Grandma's distinctive handwriting and signed & dated by her. When cousin called our grandfather, he confirmed that the check was "not a joke" as "Nana does not joke" and that she had sent it out after learning - through another cousin - that Cousin was in the danger of losing her home. He further stated that she should keep the money (the check was drawn on their joint account). Grandma refused to talk to Cousin on the phone.

Cousin has not cashed this check. They are living off their savings and she doesn't know what to do. What would you advice her? BTW, although very elderly, my grandmother is physically & mentally healthy & alert and was in full possession of her senses when she sent this large check out to a granddaughter she has not spoken to for over 10 years and refuses to speak to even today!

I see no reason not to cash the check. The grandparents clearly want the recipient to have it (drama not withstanding) and the recipient clearly needs it.

[vineviz]

Why should this thread be locked? My cousin is worried because of potential tax implications as the amount is a large 5 figure, and if this qualifies as a gift or not.

It's a gift, no tax implications for receiver, regardless the amount

Can Grandma later claim it's a loan?

Grandma can “claim” anything she wants: without a written agreement, signed by both parties, Grandma has no leg to stand on.

[mouses]

Can the grandparents afford to give this gift? If so, I would accept it. It sounds like a decent thing to do even if the rest of the relationship is not good. It's kind of touching, really.

[as9]

Deposit it, donate half to BLM (or similar), send receipt to grandma.

[oldfort]

Is there a non-monetary price your cousin will have to pay for cashing the check, i.e., will she have to listen to her grandmother go on and on to the other relatives about saving her and her husband from the poorhouse, or other snarkiness?

She doesn't care about Grandma's snarkiness as she's not allowed around her anymore. What concerns her is why this check was sent after years of ostracism and if there's anything she should be aware of - legally & tax wise - before cashing the check?

Does she think someone stole grandma's checkbook and forged grandma's signature on the check? Is she afraid grandma has dementia and is no longer mentally competent to make financial decisions? I don't see what legal issues you're afraid of?

[CAsage]

Specifically addressing the gift tax issue, while the tax would be the responsibility of the gift giver ... A couple (Grandmother and grandfather) is allowed to give any person $15k each, so both of them to another couple, $60k would have no issue. I would cash it, and write a gracious non-snarky no-issues thank you note. Perhaps Grandma is truly worried, wants to send out an olive branch or just doesn't want to see any relative suffer.

[Zillions]

Can the grandparents afford to give this gift? If so, I would accept it. It sounds like a decent thing to do even if the rest of the relationship is not good. It's kind of touching, really.

Yes, AFAIK, they are well off and it appears that they can afford it. I don't know if they (grandparents) are aware of tax implications, though. Plus, my cousin is worried they might later claim that it should have been obvious that it's a loan (since she's technically been disowned and all). Ugh, just drama!

[Zillions]

Specifically addressing the gift tax issue, while the tax would be the responsibility of the gift giver ... A couple (Grandmother and grandfather) is allowed to give any person $15k each, so both of them to another couple, $60k would have no issue. I would cash it, and write a gracious non-snarky no-issues thank you note. Perhaps Grandma is truly worried, wants to send out an olive branch or just doesn't want to see any relative suffer.

The check was for $75000, much more than 60K.

[livesoft]

I recommend to deposit the gift check as there are no taxes for the recipient. Also it helps grandmother with her conscience whether one believes that or not.

I would have no qualms cashing the check myself. And I would send a Thank you note, too.

[Katietsu]

I think she did due diligence when she called and had grandfather confirm that was not counterfeit or forged. Cousin has no obligations regarding taxes. Grandma may be legally required to file a gift tax form. If Grandma does not, it is unlikely there would be repercussions. If cousin has applied for certain types of aid, eg food stamps, she would to contact the proper agency and disclose the gift.

I found nothing unusual about Grandma giving a gift, other than the size, to a granddaughter in need who is estranged due to a choice like an interracial marriage, out of wedlock child, or interdenominational marriage. It can be horribly hard to reconcile your love for a family member with beliefs that were taught to you as unmovable from the day you were born. I wish the best for your cousin.

[Spirit Rider]

Why should this thread be locked? My cousin is worried because of potential tax implications as the amount is a large 5 figure, and if this qualifies as a gift or not.

This qualifies as a gift. Gifts are never taxable to the recipient. There may be gift tax reporting the grandparents should do, but there is almost certainly no gift tax liability for them.

[Stinky]

I recommend to deposit the gift check as there are no taxes for the recipient. Also it helps grandmother with her conscience whether one believes that or not.

I would have no qualms cashing the check myself. And I would send a Thank you note, too.

Yes, my thoughts exactly.

Send a nice, sweet thank you note. It may go unread - but one never knows.

[jibantik]

Cash it and send a thank you note with a nice big family photo attached.

[KyleAAA]

Cash it, send a thank you note. No consequences, either legal or taxwise.

[Eagle33]

Cash the check.

It sounds as if Grandma is the matriarch of the family and is probably just trying to prevent public embarrassment of the family name.

[fyre4ce]

Reading between the lines on this, it's possible the purpose of the gift was derogatory (ie. "My granddaughter's spouse belongs to race XXX and is too dumb/lazy/whatever to take care of my great-grandkids, so here's some money to make sure they don't starve" - sort of thing). It's a bit hard to tell but the previous "disowning" and refusing to talk on the phone are clues.

I dunno, this is a tricky one. I'd be very tempted to not accept a "gift" from someone I thought viewed me with contempt. Then again, it sounds like there was not much of a relationship before this check arrived, so she may have little or nothing to lose by accepting it. I'd let my feelings be the guide. If I felt like I'd humiliate myself by accepting it, I'd return it with a polite note saying that we can take care of ourselves and her great-grandkids won't starve. If I thought it wouldn't' change my feelings much, I'd cash it and put it to good use. I like the idea of donating part of it to a charity that benefits disadvantaged members of whatever race your cousin's husband belongs to, as long as it's a good charity.

There are no legal or tax consequences for accepting it.

[cshell2]

Specifically addressing the gift tax issue, while the tax would be the responsibility of the gift giver ... A couple (Grandmother and grandfather) is allowed to give any person $15k each, so both of them to another couple, $60k would have no issue. I would cash it, and write a gracious non-snarky no-issues thank you note. Perhaps Grandma is truly worried, wants to send out an olive branch or just doesn't want to see any relative suffer.

The check was for $75000, much more than 60K.

The 60K would just be the annual limit before grandparents had to fill out a form putting it against their lifetime gift limit which is 11.5 million. Taxes aren't paid on gifts above the lifetime limit until their death, so taxes really aren't an issue for either side.

I would have cashed that check in a heartbeat and sent a nice thank you.

[ColoRetiredGirl]

Cash it and send a thank you note with a nice big family photo attached.

+1! OP- I am African American and can understand how your cousin’s grandparents feel. They were born in a different time. It is definitely not right as love crosses all races and is what it is. You cannot change them. The grandparents sent that check out of love for their granddaughter. She should accept the check with gratitude. If they see a family picture and how happy she is, they may and this is a big may soften their hearts, Life is too short to miss out on or harbor ill feeling with family.

[BillWalters]

Take the money then donate to every racial justice charity imaginable in Grandmas name. Be sure to give her home phone number and request written confirmation of every donation to Grandma’s home address.

[Sandtrap]

Regardless of check amount.
Cash or deposit the check ASAP.
Why?
A "stop payment" can be put on it as a result of "second thoughts", "outside input", "peer pressure", "family pressure".

And, do send a "Thank You Note" and/or "Flowers Delivered" with a note of appreciation.
Appreciation is a universal thing to do.

j

[FoolMeOnce]

Can the grandparents afford to give this gift? If so, I would accept it. It sounds like a decent thing to do even if the rest of the relationship is not good. It's kind of touching, really.

Yes, AFAIK, they are well off and it appears that they can afford it. I don't know if they (grandparents) are aware of tax implications, though. Plus, my cousin is worried they might later claim that it should have been obvious that it's a loan (since she's technically been disowned and all). Ugh, just drama!

Save a picture of it, the memo line helps show it was not a loan.

No tax issues for cousin.

[02nz]

No promissory note means it's not a loan.

[index245]

Cash it and say thank you! Any attempt at reconciliation is a good thing (and this is obviously that, even if she is too proud to speak with them).

And the gift tax considerations only belong to the giver. And if your cousin is living off savings, it is a no brainer.

I love the send a "family photo" idea from earlier posts!

[bottlecap]

The tax consequences of a gift are on the giver. Not really an issue there.

However, who knows what the giver may later claim it is? Seems clear it is intended as a gift, but that doesn't prevent later battles, legal or otherwise.

Unless this is a sincere, but ham-handed, attempt at reconciliation, this is an interesting social experiment your grandmother is playing. From a lot of responses here, and she is likely to win. It doesn't matter what your sister does with the money. Short of lighting it on fire (which is illegal) or sending it back with a nice note, it's unwinnable.

Sorry to hear your sister's family is in this situation.

JT

[ColoRetiredGirl]

Regardless of check amount.
Cash or deposit the check ASAP.
Why?
A "stop payment" can be put on it as a result of "second thoughts", "outside input", "peer pressure", "family pressure".

And, do send a "Thank You Note" and/or "Flowers Delivered" with a note of appreciation.
Appreciation is a universal thing to do.

j

A BIG +1

[fyre4ce]

Cash it and send a thank you note with a nice big family photo attached.

LOVE this idea!

[celia]

I would cash it and send a gracious thank you note. Maybe even send flowers and/or a mixed box of chocolates (dark and white?) to the grandparents.

Considering the current racial tensions going on, this may be an olive branch being extended. How else would you expect the riff to be resolved? Grandmother took the first step, and maybe the cousin should reciprocate. Although Grandma said she disinherited the cousin, that may just be talk and she probably cares about all her extended family.

[CAsage]

Take the money then donate to every racial justice charity imaginable in Grandmas name. Be sure to give her home phone number and request written confirmation of every donation to Grandma’s home address.

Somehow giving out someones personal home phone has gotta be either illegal, immoral, rude or incendiary. In no way would this help.

[Zillions]

Take the money then donate to every racial justice charity imaginable in Grandmas name. Be sure to give her home phone number and request written confirmation of every donation to Grandma’s home address.

My grandmother is 86. There's absolutely no way any of us would give out her address or phone number. That would be harassment.

Thank you everyone for responding. My cousin will deposit the check first thing on Monday.

[Sandtrap]

What sometimes can happen.

A relative’s family.
Married couple falls on hard times, near fatal health tragedy with long term disability and enormous medical expenses.
MIL sends Daughter support money monthly for 4 years stating it as a gift. Money helps cover medical and health recovery and living expenses.
Decades later, a detailed record of these payments are discovered by a sibling executor of the MILs estate after passing. Executor hates her married sister. Deducts the gifted money from estate disbursements and used MILs record of payments as proof of a “verbal loan agreement”. Sister goes to court and loses. Executor wins case and greater % of her disbursements due to the sibling loan deduction which ended up exceeding $400,000.

This concerns the interpretation of “loan” vs “gift”.

j

[oldfort]

Take the money then donate to every racial justice charity imaginable in Grandmas name. Be sure to give her home phone number and request written confirmation of every donation to Grandma’s home address.

Somehow giving out someones personal home phone has gotta be either illegal, immoral, rude or incendiary. In no way would this help.

Not to mention, the poor NAACP telemarketer who got stuck with grandma on the phone.

[increment]

The 60K would just be the annual limit before grandparents had to fill out a form putting it against their lifetime gift limit which is 11.5 million. Taxes aren't paid on gifts above the lifetime limit until their death, so taxes really aren't an issue for either side.

I believe that gift taxes are expected to be paid along with the annual filing of Form 709 (for those who have exhausted their lifetime limit).

[cshell2]

I think this is probably grandma's way of apologizing while still alive instead of just putting her back in the will and cousin not finding out she'd had a change of heart until after she was gone. It may just be an advance on what she would have inherited anyhow. Even if it was done to be snarky, who cares? The money is needed, and it would be foolish to just tear the check up or give it away to a cause she wouldn't agree with just to stick it to her. Accept it as if it was given with good intentions and move on.

[cshell2]

The 60K would just be the annual limit before grandparents had to fill out a form putting it against their lifetime gift limit which is 11.5 million. Taxes aren't paid on gifts above the lifetime limit until their death, so taxes really aren't an issue for either side.

I believe that gift taxes are expected to be paid along with the annual filing of Form 709 (for those who have exhausted their lifetime limit).

That's possible. In my world nobody ever reaches the 11.5 million.

[Grt2bOutdoors]

Why should this thread be locked? My cousin is worried because of potential tax implications as the amount is a large 5 figure, and if this qualifies as a gift or not.

Cash the check. There are no tax implications on the part of the receiver, the sender may want to file Form 709 here ----> https://www.irs.gov/pub/irs-pdf/i709.pdf

As for the family dynamics, read between the lines, the check would not have been sent if there was true animosity between the parties. Cash the check and be done with it. The recipient could be nice and acknowledge the gift by sending a heartfelt letter to the sender, ignoring and not addressing the past. Good Luck!

[Zillions]

What sometimes can happen.

A relative’s family.
Married couple falls on hard times, near fatal health tragedy with long term disability and enormous medical expenses.
MIL sends Daughter support money monthly for 4 years stating it as a gift. Money helps cover medical and health recovery and living expenses.
Decades later, a detailed record of these payments are discovered by a sibling executor of the MILs estate after passing. Executor hates her married sister. Deducts the gifted money from estate disbursements and used MILs record of payments as proof of a “verbal loan agreement”. Sister goes to court and loses. Executor wins case and greater % of her disbursements due to the sibling loan deduction which ended up exceeding $400,000.

This concerns the interpretation of “loan” vs “gift”.

j

Woah! Did the couple attempt to repay the gift? The reason my cousin was worried is not because of losing a portion of her inheritance (she was told point blank that she's been disinherited, in front of several family members, so she expects nothing) but because she's worried that someone else might sue her for repayment eventually. I see now that that cannot happen, absent a promissory note.

[fyre4ce]

What sometimes can happen.

A relative’s family.
Married couple falls on hard times, near fatal health tragedy with long term disability and enormous medical expenses.
MIL sends Daughter support money monthly for 4 years stating it as a gift. Money helps cover medical and health recovery and living expenses.
Decades later, a detailed record of these payments are discovered by a sibling executor of the MILs estate after passing. Executor hates her married sister. Deducts the gifted money from estate disbursements and used MILs record of payments as proof of a “verbal loan agreement”. Sister goes to court and loses. Executor wins case and greater % of her disbursements due to the sibling loan deduction which ended up exceeding $400,000.

This concerns the interpretation of “loan” vs “gift”.

j

This makes no sense to me, for several reasons.

First of all, I didn't know an executor had the authority to reduce the amount an heir receives based on prior payments between heir and decedent, in either direction, especially many decades later. If the will states "Child A gets X percent of assets" then deviating from that is a violation of the will. If Child A is the executor for a parent, they're allowed to reach back and decide that because parent spent more on Child B's education decades ago that they're going to take a bigger percentage of the estate even if the will says 50/50? Something's not right here.

Typically a loan takes the form of the lender giving the borrower a lump sum, and the borrower paying back the lender in a series of periodic payments. If there were a record of the periodic payments and the loan were alleged, couldn't that just as easily be evidence that the daughter made a large loan to the MIL that she only partially paid back, and was owed decades of missed payments plus interest?

It seems like the daughter had a terrible lawyer, if s/he lost over $400k for their client based on the facts presented here.

[adamthesmythe]

I cannot understand the soul-searching. Cash the damn check.

And as noted, the only implications about federal gift tax are that the giver should file a form.

[MarkNYC]

Specifically addressing the gift tax issue, while the tax would be the responsibility of the gift giver ... A couple (Grandmother and grandfather) is allowed to give any person $15k each, so both of them to another couple, $60k would have no issue. I would cash it, and write a gracious non-snarky no-issues thank you note. Perhaps Grandma is truly worried, wants to send out an olive branch or just doesn't want to see any relative suffer.

The check was for $75000, much more than 60K.

The 60K would just be the annual limit before grandparents had to fill out a form putting it against their lifetime gift limit which is 11.5 million. Taxes aren't paid on gifts above the lifetime limit until their death, so taxes really aren't an issue for either side.

Since the check was made out to the cousin, there is only one donee not two, so the grandparents' combined annual exclusion amount would be $30K not $60K. It does not matter what the cousin does with the money.

[JonnyDVM]

There are no tax implications for the receiver.

I must be the crazy one. My thought is I would never take money from someone who treated me and my family that way. Maybe if she apologized. Then again this is Bogleheads. If someone offered $20 to people here to spit on the them we would see a lot of posts titled “$20 windfall, invest or payoff mortgage ?”

[Sandtrap]

What sometimes can happen.

A relative’s family.
Married couple falls on hard times, near fatal health tragedy with long term disability and enormous medical expenses.
MIL sends Daughter support money monthly for 4 years stating it as a gift. Money helps cover medical and health recovery and living expenses.
Decades later, a detailed record of these payments are discovered by a sibling executor of the MILs estate after passing. Executor hates her married sister. Deducts the gifted money from estate disbursements and used MILs record of payments as proof of a “verbal loan agreement”. Sister goes to court and loses. Executor wins case and greater % of her disbursements due to the sibling loan deduction which ended up exceeding $400,000.

This concerns the interpretation of “loan” vs “gift”.

j

This makes no sense to me, for several reasons.

First of all, I didn't know an executor had the authority to reduce the amount an heir receives based on prior payments between heir and decedent, in either direction, especially many decades later. If the will states "Child A gets X percent of assets" then deviating from that is a violation of the will. If Child A is the executor for a parent, they're allowed to reach back and decide that because parent spent more on Child B's education decades ago that they're going to take a bigger percentage of the estate even if the will says 50/50? Something's not right here.

Typically a loan takes the form of the lender giving the borrower a lump sum, and the borrower paying back the lender in a series of periodic payments. If there were a record of the periodic payments and the loan were alleged, couldn't that just as easily be evidence that the daughter made a large loan to the MIL that she only partially paid back, and was owed decades of missed payments plus interest?

It seems like the daughter had a terrible lawyer, if s/he lost over $400k for their client based on the facts presented here.

Yes. It would certainly seem that way but there's no way to really really really know these things not having been in the middle of the issues and involved.

On topic actionably:
Regardless of the validity of the case study, point of the matter was simply to be cautious as sometimes things work out differently than anticipated.

Thanks for posting.
j