24

Before my mother died recently she gave me a verbal list of bequests she wanted to make that were not in her will. Some of these exceed $14k. I will be paying them out of my own bank accounts with money I inherited from her.

Must I be report these to the IRS as gifts from myself?

31

You say that you inherited the money from your mother, and are now paying these people using money that is already yours. Because of that, the money is considered a gift from you to them, and the fact that you are doing it in accordance with your mother's wishes doesn't change that. For it to be considered a bequest from your mother's estate directly to these beneficiaries, it would have had to be handled via the regular by-the-book inheritance procedure and been given to them directly rather than bequeathed to you with informal instructions to pass it on to them.

If one gives another person more than $14K in any calendar year, there is the potential gift tax issue to address. I'll explain why it's more a matter of 'addressing' than 'paying', as there are a number of legal ways around this.

Form 709 is what you'll use. In the end, you'll report the gifts over $14K but no tax will be due as they'll simply go against your lifetime gifting allowance, currently $5.49M per person.

Note, 2 ways to avoid even this obligation. If you have a spouse, you have a combined $28K/yr gifting (per recipient) with no reporting required. Similarly, if the recipient has a spouse, you can gift them $14K. i.e. couple to couple can gift $56K/yr. Last, why not just gift $14K before December, and in January, give the second installment? If I had money coming in separate from a will, I'd be happy that you honored a verbal request, and wouldn't be so greedy as to expect you to risk a dime of your own finances to transfer the funds immediately.

  • 2
    Given that we are already mid-september, splitting them around the new year part before and part after is just fine. – Mindwin Sep 14 '17 at 14:34
  • 1
    Thanks for your help. I want to make the bequests ASAP because two of the people are elderly. I will just file the Form 709. It doesn't sound onerous and I will never have $5M, let alone give it away. – D Barrow Sep 15 '17 at 23:23

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.