6 ms·

The fact is that the government taxes estates and not gifts. It's better to give money to your adult children, even if they don't need it, to avoid probate and

The fact is that the government taxes estates and not gifts. It's better to give money to your adult children, even if they don't need it, to avoid probate and estate taxes. This is just the basic mentality of "I don't want someone else to take my money."

mikeash 8y ago
Gift and estate taxes are linked. They kick in only when you exceed the lifetime exemption, which is currently $11.2 million for individuals and $22.4 million for married couples.
dbjacobs 8y ago
With a couple able to transfer over $22 mil without estate taxes. Not many people have that issue as the driving factor.
delecti 8y ago
That's just untrue. You can give 15k per person per year (may have gone up in the past year) without reporting it. Anything more than that you have to report it, and it counts against the untaxed portion of your estate. Aside from that 15k per person per year value, there's no tax difference between giving it away now, or willing it away when you die. Estate and gift tax are intertwined. There's even a page on the IRS web called "Filing Estate and Gift Tax Returns". https://www.irs.gov/businesses/small-businesses-self-employed/filing-estate-and-gift-tax-returns https://www.irs.gov/businesses/small-businesses-self-employe... It might be easier to work things out while you're alive to make the gifts, but it doesn't get you out of the taxes.
- tathougies 8y ago
  Yeah, so the thing is that you give the money away while you're alive. You can give 15k per year per spouse. So a married couple with two married children can give away 30k to each child and 30k to each son/daughter-in-law. That reduces the total estate that is taxed by 60k each year. If you have 20 years left of life, that's 1.2 million dollars given tax free. Way better than a probate. You're correct that if they gave all 1.2 million in one year, it's subject to tax, but no one does that.
  - delecti 8y ago
    The threshold for estate tax is over $20m right now for that same married couple. Your example takes 20 years of foresight and only gets you an extra 5% before hitting estate tax.
    - tathougies 8y ago
      20 years of foresight is not much if you start at 55. 5 percent is still free money. I'm not sure what the argument here is. The rich are more organized than you give credit for
      - delecti 8y ago
        My point is that your initial comment stated this was a good strategy to avoid probate and estate taxes. I agree it's a good strategy to avoid probate, but I disagree that it's a very useful strategy to avoid estate taxes. You also incorrectly (or at least greatly oversimplified) said gifts weren't taxed.

mikeash 8y ago

Gift and estate taxes are linked. They kick in only when you exceed the lifetime exemption, which is currently $11.2 million for individuals and $22.4 million for married couples.

dbjacobs 8y ago

With a couple able to transfer over $22 mil without estate taxes. Not many people have that issue as the driving factor.

delecti 8y ago

That's just untrue. You can give 15k per person per year (may have gone up in the past year) without reporting it. Anything more than that you have to report it, and it counts against the untaxed portion of your estate. Aside from that 15k per person per year value, there's no tax difference between giving it away now, or willing it away when you die. Estate and gift tax are intertwined. There's even a page on the IRS web called "Filing Estate and Gift Tax Returns". https://www.irs.gov/businesses/small-businesses-self-employed/filing-estate-and-gift-tax-returns https://www.irs.gov/businesses/small-businesses-self-employe... It might be easier to work things out while you're alive to make the gifts, but it doesn't get you out of the taxes.

tathougies 8y ago
Yeah, so the thing is that you give the money away while you're alive. You can give 15k per year per spouse. So a married couple with two married children can give away 30k to each child and 30k to each son/daughter-in-law. That reduces the total estate that is taxed by 60k each year. If you have 20 years left of life, that's 1.2 million dollars given tax free. Way better than a probate. You're correct that if they gave all 1.2 million in one year, it's subject to tax, but no one does that.
- delecti 8y ago
  The threshold for estate tax is over $20m right now for that same married couple. Your example takes 20 years of foresight and only gets you an extra 5% before hitting estate tax.
  - tathougies 8y ago
    20 years of foresight is not much if you start at 55. 5 percent is still free money. I'm not sure what the argument here is. The rich are more organized than you give credit for
    - delecti 8y ago
      My point is that your initial comment stated this was a good strategy to avoid probate and estate taxes. I agree it's a good strategy to avoid probate, but I disagree that it's a very useful strategy to avoid estate taxes. You also incorrectly (or at least greatly oversimplified) said gifts weren't taxed.