Gifting

[BridgeMaven]

My daughter has three children who will be going to college in the near future. . She and her husband have set up an education fund for each of them but I want to help them pay for college. I know that I can gift my daughter up to $18,000 a year without having to pay any gift tax. However if I make the check payable to both of them is that considered to be one gift from me or two gifts to two different people from me?

[mcarley]

I’m not a tax professional, but I might be inclined to just make the check out to one of them. Of course, I assume this means you could give $18k EACH to your daughter and SIL if you wanted to be that generous.

Also, if they have529 plans setup for the kids, you could contribute to those too.

[BridgeMaven]

@mcarley

I’m not a tax professional, but I might be inclined to just make the check out to one of them. Of course, I assume this means you could give $18k EACH to your daughter and SIL if you wanted to be that generous.

Also, if they have529 plans setup for the kids, you could contribute to those too.

@mcarley - thanks for the helpful response!

[jimtoo]

mccarley is right on about structuring the gift. But, you can gift any amount to any individual because there is no gift tax.

If you give any individual more than the exemption (currently $18K), the amount in excess of the exemption can reduce your estate tax exemption (currently about $13.6 million). You file a form 709 with the IRS declaring the amount in excess of the exemption. You have the option to pay the tax on that excess or not. If not, save a copy of that 709 with your estate planning materials.

I don’t advise paying the tax now unless you know your estate tax will exceed the exemption because you may never owe it. Just be aware that the current exemptions were part of the 2017 tax bill. If that bill is not renewed or made permament by 2026, the tax structure (estate and income tax) revert to what they were in 2017. That would make the estate tax exemption about $5.6 million, if I remember correctly.

[BridgeMaven]

@jimtoo

If you give any individual more than the exemption (currently $18K), the amount in excess of the exemption can reduce your estate tax exemption (currently about $13.6 million). You file a form 709 with the IRS declaring the amount in excess of the exemption. You have the option to pay the tax on that excess or not. If not, save a copy of that 709 with your estate planning materials.

I don’t advise paying the tax now unless you know your estate tax will exceed the exemption because you may never owe it. Just be aware that the current exemptions were part of the 2017 tax bill. If that bill is not renewed or made permament by 2026, the tax structure (estate and income tax) revert to what they were in 2017. That would make the estate tax exemption about $5.6 million, if I remember correctly.

@jimtoo - Thank you! I know that I can gift one check just payable to my daugher and another check just payable to my son in law for the gift tax exemption of $18,000 each. However, would there be a problem if I gave only one check payable to both of them that was more then $18,000 (allowed for one person) but less than $36,000 (allowed for two people)