Any way around gift tax?

The way around it is called a qualified disclaimer. And it will only work if your sons have no children. Well, not exactly, but it will be much more complicated if they do.

Assuming your father has already passed away and your mother was not married, your older son can reject the inheritance in writing, if done within nine months of your mother's death. The inheritance would be treated as if he died before your mother, so the money would then go to you (assuming he has no children). Then you and your wife do a qualified disclaimer, and the money will go to your sons equally.

It's not what the IRS cares about, it's what the laws passed by Congress say. And Congress cares about all gifts other than to spouses.

The IRS may be uncaring, but they are often concerned. They are concerned with what one brother gives another. Why did your mother not give anything to the younger son? Maybe she was wise in doing so. Maybe you should dole out the money little by little over many years or as a legitimate need arises, as a self appointed spendthrift clause.

It will take less than 3 years to give him half the money if you go full bore at $14,000 per year. $14,000 today, $14,000 1/1/2015, and $9,500

Or, if you don't think you will unwisely use up your gift tax credit, give it all to him and fill out the form.

But I think you should seriously give some thought to your mother's thinking. Sorry for your loss.

There is no reason that the one son can't give the other son 1/2 of the inheritance and not pay any gift taxes. Your question continues the misconception that if you give more than $14,000 (the $13,000 in your post is out of date) you automatically owe a gift tax. You don't. You may be required to file a gift tax return but unless he has given away more than the lifetime exclusion of $5,340,000 up to 2014, then it will be a nontaxable return.

Filing a gift tax return in the year of the gift without any tax due is much simpler than giving away $14,000 per year for the next several years.

She created the trust in 1993, 4 months before he was born. She didn't think to do anything about for the next 20 years. Unfortunately it lists older son and two cousins by name, rather than as grandchildren.

The IRS may be uncaring, but they are often concerned. They are concerned with what one brother gives another. Why did your mother not give anything to the younger son? Maybe she was wise in doing so. Maybe you should dole out the money little by little over many years or as a legitimate need arises, as a self appointed spendthrift clause.

It will take less than 3 years to give him half the money if you go full bore at $14,000 per year. $14,000 today, $14,000 1/1/2015, and $9,500

Or, if you don't think you will unwisely use up your gift tax credit, give it all to him and fill out the form.

But I think you should seriously give some thought to your mother's thinking. Sorry for your loss. ================ Since we have a decedent here, why not disclaim half of the inheritance from the trust? That avoids the gift-tax question because it becomes an estate-tax issue (which is moot as zero tax for a small-enough estate).

Sounds like whoever drafted the trust did a bad job. Normally a gift is left to all children (or grandchildren, for example) who may be alive or in utero when the trustor dies, whether or not they were conceived or born when the trust was drafted.

I have already suggested a disclaimer. The problem with disclaiming half the inheritance is that it would then go to the beneficiary's parents. They could also disclaim it, but then it would go to both the the sons equally.

The disclaimer has to be of the entire inheritance, which will result in each of the sons getting half.

That's an excellent point. The son can file a gift tax return, and then must keep the form in his file for the rest of his life, so that the gift (or the excess over the annual exclusion amount) can be included in his estate tax return when he dies. Chances are his estate won't need to file an estate tax return, but you never know.

in that case, I find the older son to be very commendable.

I know you can refuse an inheritance, but can you also refuse money from a trust? Would it then go to me, and if I refuse it, to my sons equally?

Yes, you can refuse money from a trust. But you must do it in writing, and you must do it within nine months of the time the transfer creating the interest was made, or after you turn 21, whichever is later. This is the rule under federal tax law. Your state's law may vary, particularly if you live in Louisiana.

If you refuse the gift, it will go to whomever would inherit from you if you died without a will. If you are married it will probably go to your spouse. If not and one or both of your parents are alive, it will go to them. And if they are not alive, it will go equally to your children. But again, the laws of the state you live in may vary this formula.

I was wrong when I mentioned before that one son can disclaim the entire gift and then half would come back to him. Under a qualified disclaimer it can't directly come back to him. You may be able to accomplish the goal, but it is more complicated than I originally wrote.

Isn't it the case that many people would never know anything at all at the time when the transfer creating the interest was made?

If I make a trust and leave my money to you, how would you know about it at the time I create the trust?

Depends on the circumstances.

If you create a trust for yourself that I would inherit when you die, you normally have the right to change that trust at any time before you die. So I have no legal interest until that time. The nine months doesn't start to run until I have a legal right to get whatever it is.

So if I create an irrevocable trust with you as a beneficiary and don't tell you about it, after 9 months passes from its creation, which was unbeknown to you, you cannot refuse the inheritance?

It is very possible, yes.

The answer to that would depend on whether the gift would be considered "complete" under state law. Gifts of real estate are not normally complete if the donnee is not aware of them. And the rule may be the same for other gifts under state law.

interesting, thanks. And don't for a minute think you are in line for a bequest from me - merely hypothetical, that's all!

interesting, thanks. And don't for a minute think you are in line for a bequest from me - merely hypothetical, that's all! ============= Note that real estate is "titled property" (and so are vehicles). What holds true for them may not hold true for untitled property.

On Friday, July 11, 2014 2:26:29 PM UTC-7, Pico Rico wrote: | "Stuart A. Bronstein"