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Can the financial power of attorney for someone who is close to death gift money before the person's passing in order to avoid estate tax on the gifted amount?
Just a quick thought...an attorney might be able to suggest a structured payout to avoid taxes on an otherwise lump sum. Or if there's a trust in existence and that heir would have a (sub) trust created for him or her (this is what we've done), and assuming the Trustee has authority, that kind of structured payout might stretch the inheritance and tax obligation out over the years.
Derek, thanks for the explanation. So, your parent must live in a state that still has inheritance taxes? And you're concerned about this on the individual's level, but not on the estate level since the estate wouldn't be subject to estate taxes b/c of its value?
You ask if the state or IRS might view this as tax evasion. Well, yes, I would think so. Otherwise, why wouldn't the estate be assessed and settled and disposition made to the heirs at that time?
And don't forget that you've admitted this is a concern on a public forum. I don't know if the IRS uses software similar to that of law enforcement agencies, but we all leave a cybertrail when we post.
I do see your point, but you're on thin ice when you try to anticipate what taxing authorities will or won't do.
I think only the state treasury office and IRS could answer this. It requires access to policies that none of us (except one poster who used to work for the IRS and another who's an accountant) have. Speculation would only be guessing.
I think you'd be wise to check with a tax accountant. Don't gamble on potential IRS or state treasury department actions later; it isn't worth it. I get the impression the estate has considerable worth, and if so, I'm assuming an attorney created the estate planning documents. A quick call and/or visit to him or her could help clarify your options, and there may be others of which we're not aware.
Good luck; I hope you find a good solution for this particular heir.
I don't think a POA has that authority without consent of the one who assigned him/her. If you get their permission, then get it in writing. The next person in charge is the Executor.
To answer some of the questions. The idea is to ease the burden on the heir by gifting only the amount that is below the taxable (personal income tax) amount, which is as I understand it $17,000. This amount would not put a strain on the estate and there is no one who would contest the gift. It would only be to circumvent a little of the inheritance tax. Could the government (IRS and state) see this as tax evasion? The last thing I need after doing everything right for the past 6 years is to screw up now.
cjdux, in my Dad's case, I waited until Probate was signed, sealed, and delivered before I would even think of writing gift checks. Probate can take a lot of time. And there could be a lot of expenses after death.
The Executor needs to file income taxes next year for tax year 2018 if the income/dividends/interest earned is over a certain amount, and the quarterly estimated taxes that would need to be paid. Estate funds will be used.
Get the advice of a CPA to see what are the pros and cons depending on your State laws.
Who specifically wants to initiate a gift? If the individual close to death is still mentally able to make the determination to gift, he/she could direct the proxy to do so. But I'd be concerned about potential conflict of interest if the proxy makes the decision on his or her own, especially if the dying person is not able to make a gifting decision. In that situation, I think any gifting would be highly suspect as to the proxy's actions.
Another potential concern is that this transfer would be made just prior to someone's death. Are there sufficient assets in the dying person's account(s) to pay for longer care if death doesn't occur soon, and equally as important, to pay all the expenses of the last illness, manage the estate and eventually close it out?
If you're thinking not about estate but rather about income taxes, that depends on the recipient's AGI when filing his/her taxes.
It used to be that a Form 709 was filed for gift taxes. That's typically prepared by an attorney. I think an attorney would be concerned about doing that for a gift made so close to death.
And I'd still be very concerned about making any such transfer just prior to death, especially if the gift would be to one person only in a family, and if there are others who wouldn't be gifted, or if there might not be sufficient assets to pay the last illness expenses and manage the estate until it's closed out.
It depends on if the document allows gifting. Inheritance tax really is not an issue any longer. A couple of million (I think) is allowed before inheritance tax is payable by an heir. Not many have that problem. Best not to gift money just in case.
By proceeding, I agree that I understand the following disclosures:
I. How We Work in Washington.
Based on your preferences, we provide you with information about one or more of our contracted senior living providers ("Participating Communities") and provide your Senior Living Care Information to Participating Communities. The Participating Communities may contact you directly regarding their services.
APFM does not endorse or recommend any provider. It is your sole responsibility to select the appropriate care for yourself or your loved one. We work with both you and the Participating Communities in your search. We do not permit our Advisors to have an ownership interest in Participating Communities.
II. How We Are Paid.
We do not charge you any fee – we are paid by the Participating Communities. Some Participating Communities pay us a percentage of the first month's standard rate for the rent and care services you select. We invoice these fees after the senior moves in.
III. When We Tour.
APFM tours certain Participating Communities in Washington (typically more in metropolitan areas than in rural areas.) During the 12 month period prior to December 31, 2017, we toured 86.2% of Participating Communities with capacity for 20 or more residents.
IV. No Obligation or Commitment.
You have no obligation to use or to continue to use our services. Because you pay no fee to us, you will never need to ask for a refund.
V. Complaints.
Please contact our Family Feedback Line at (866) 584-7340 or ConsumerFeedback@aplaceformom.com to report any complaint. Consumers have many avenues to address a dispute with any referral service company, including the right to file a complaint with the Attorney General's office at: Consumer Protection Division, 800 5th Avenue, Ste. 2000, Seattle, 98104 or 800-551-4636.
VI. No Waiver of Your Rights.
APFM does not (and may not) require or even ask consumers seeking senior housing or care services in Washington State to sign waivers of liability for losses of personal property or injury or to sign waivers of any rights established under law.
I agree that:
A.
I authorize A Place For Mom ("APFM") to collect certain personal and contact detail information, as well as relevant health care information about me or from me about the senior family member or relative I am assisting ("Senior Living Care Information").
B.
APFM may provide information to me electronically. My electronic signature on agreements and documents has the same effect as if I signed them in ink.
C.
APFM may send all communications to me electronically via e-mail or by access to an APFM web site.
D.
If I want a paper copy, I can print a copy of the Disclosures or download the Disclosures for my records.
E.
This E-Sign Acknowledgement and Authorization applies to these Disclosures and all future Disclosures related to APFM's services, unless I revoke my authorization. You may revoke this authorization in writing at any time (except where we have already disclosed information before receiving your revocation.) This authorization will expire after one year.
F.
You consent to APFM's reaching out to you using a phone system than can auto-dial numbers (we miss rotary phones, too!), but this consent is not required to use our service.
You ask if the state or IRS might view this as tax evasion. Well, yes, I would think so. Otherwise, why wouldn't the estate be assessed and settled and disposition made to the heirs at that time?
And don't forget that you've admitted this is a concern on a public forum. I don't know if the IRS uses software similar to that of law enforcement agencies, but we all leave a cybertrail when we post.
I do see your point, but you're on thin ice when you try to anticipate what taxing authorities will or won't do.
I think only the state treasury office and IRS could answer this. It requires access to policies that none of us (except one poster who used to work for the IRS and another who's an accountant) have. Speculation would only be guessing.
I think you'd be wise to check with a tax accountant. Don't gamble on potential IRS or state treasury department actions later; it isn't worth it. I get the impression the estate has considerable worth, and if so, I'm assuming an attorney created the estate planning documents. A quick call and/or visit to him or her could help clarify your options, and there may be others of which we're not aware.
Good luck; I hope you find a good solution for this particular heir.
The Executor needs to file income taxes next year for tax year 2018 if the income/dividends/interest earned is over a certain amount, and the quarterly estimated taxes that would need to be paid. Estate funds will be used.
Get the advice of a CPA to see what are the pros and cons depending on your State laws.
Another potential concern is that this transfer would be made just prior to someone's death. Are there sufficient assets in the dying person's account(s) to pay for longer care if death doesn't occur soon, and equally as important, to pay all the expenses of the last illness, manage the estate and eventually close it out?
As Glad writes, and as I understand, estate taxes don't come into play unless the estate is valued in the millions. See: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax, for these levels.
If you're thinking not about estate but rather about income taxes, that depends on the recipient's AGI when filing his/her taxes.
It used to be that a Form 709 was filed for gift taxes. That's typically prepared by an attorney. I think an attorney would be concerned about doing that for a gift made so close to death.
And I'd still be very concerned about making any such transfer just prior to death, especially if the gift would be to one person only in a family, and if there are others who wouldn't be gifted, or if there might not be sufficient assets to pay the last illness expenses and manage the estate until it's closed out.