Dividing gifts to child between both spouses

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
User avatar
Topic Author
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Dividing gifts to child between both spouses

Post by fetch5482 »

Hello,

Last year we contributed a total of $20,000 to our child ($10K each in I-Bonds & 529). These contributing all came from the same bank account that is held by the living trust for which my spouse and I are trustees.

We realize this is over the gift tax limit from a single parent, so we should split this somehow at tax filing time to show that each of us gifted 10k to stay under our individual limits. We file our taxes jointly.

I couldn't find a way to do this in turbo tax deluxe (download version). Does someone here know how to file this, or point me to a good article that explains this (ideally specific to TT, but if it's generic that's ok too).
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
capran
Posts: 1091
Joined: Thu Feb 18, 2016 9:45 am

Re: Dividing gifts to child between both spouses

Post by capran »

I am wondering if any cash gift under 15,000 per person would even need to be reported. I am assuming TT is determining if form 709 needs to be filed, but if each of you gifted 10k each, I would think that input is not required. But it will be interesting to see if others know of a TT work around.
FoolMeOnce
Posts: 1397
Joined: Mon Apr 24, 2017 11:16 am

Re: Dividing gifts to child between both spouses

Post by FoolMeOnce »

Is TT prompting you to fill in information about the gifts, or are you proactively trying to report this? If the former, what answers are you giving that trigger the prompt?
User avatar
Topic Author
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Dividing gifts to child between both spouses

Post by fetch5482 »

capran wrote: Tue Jan 25, 2022 10:20 pm I am wondering if any cash gift under 15,000 per person would even need to be reported. I am assuming TT is determining if form 709 needs to be filed, but if each of you gifted 10k each, I would think that input is not required. But it will be interesting to see if others know of a TT work around.
Yeah if it's automatically assuming that our gifts are divided equally among both the spouses perhaps that may be ok.. but how will we prove to IRS later that those shouldn't be counted against our inheritance/estate limit in future?
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
User avatar
Topic Author
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Dividing gifts to child between both spouses

Post by fetch5482 »

FoolMeOnce wrote: Tue Jan 25, 2022 10:38 pm Is TT prompting you to fill in information about the gifts, or are you proactively trying to report this? If the former, what answers are you giving that trigger the prompt?
I'm trying to proactively report. We decided to max out gifts to the child going forward each year to reduce the tax liability on inheritance in future.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
User avatar
Topic Author
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Dividing gifts to child between both spouses

Post by fetch5482 »

Also going by this link: https://turbotax.intuit.com/tax-tips/es ... /L1sFpFeXV where the following example is given:
One spouse, for example, could give $30,000 to his son without triggering the gift tax if the other spouse agrees not to give the son any gift that year. Although no tax is due in this situation, the first spouse would be required to file a gift tax return indicating that the second spouse had agreed to split the gift.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
capran
Posts: 1091
Joined: Thu Feb 18, 2016 9:45 am

Re: Dividing gifts to child between both spouses

Post by capran »

gas_balloon wrote: Tue Jan 25, 2022 10:40 pm
FoolMeOnce wrote: Tue Jan 25, 2022 10:38 pm Is TT prompting you to fill in information about the gifts, or are you proactively trying to report this? If the former, what answers are you giving that trigger the prompt?
I'm trying to proactively report. We decided to max out gifts to the child going forward each year to reduce the tax liability on inheritance in future.
Makes sense. We're nowhere near the max estate values to worry about federal estate taxes in the future, but started gifting our son last year (2021) writing separate 15k checks, one from me and one from spouse. (kept a copy to document the gift came from each of us.) But we paper file and know that gifting 15,000 or less per person is not a reportable event, even if we had a large estate that exceeds the exclusion limits. This year we plan on 16k each. (we do live in a state that has a state estate tax with an exclusion of only 2,193,000, so we'll have to hopefully live long enough to max out quite a few years to avoid the state estate tax.
AlohaJoe
Posts: 6609
Joined: Mon Nov 26, 2007 1:00 pm
Location: Saigon, Vietnam

Re: Dividing gifts to child between both spouses

Post by AlohaJoe »

gas_balloon wrote: Tue Jan 25, 2022 10:40 pm
FoolMeOnce wrote: Tue Jan 25, 2022 10:38 pm Is TT prompting you to fill in information about the gifts, or are you proactively trying to report this? If the former, what answers are you giving that trigger the prompt?
I'm trying to proactively report. We decided to max out gifts to the child going forward each year to reduce the tax liability on inheritance in future.
There's no such thing as proactively reporting you don't need to file a gift tax return.
User avatar
HueyLD
Posts: 9789
Joined: Mon Jan 14, 2008 9:30 am

Re: Dividing gifts to child between both spouses

Post by HueyLD »

gas_balloon wrote: Tue Jan 25, 2022 10:10 pm
I couldn't find a way to do this in turbo tax deluxe (download version). Does someone here know how to file this, or point me to a good article that explains this (ideally specific to TT, but if it's generic that's ok too).
Intuit does not give away their products for more difficult forms such as form 709.

You will need their ProSeries and the software will cost you north of $500 and even over $1,000 higher depending on your need.

It is easier to prepare form 709 using pencil and paper by careful study of IRS form and instructions.
User avatar
windaar
Posts: 1673
Joined: Thu Mar 08, 2012 6:31 am

Re: Dividing gifts to child between both spouses

Post by windaar »

The "limit" has to do with whether or not you need to report it, not the amount you can gift. The lifetime limit is 11.7 Million, an amount that no one that I know would ever reach.
Nobody knows nothing.
FoolMeOnce
Posts: 1397
Joined: Mon Apr 24, 2017 11:16 am

Re: Dividing gifts to child between both spouses

Post by FoolMeOnce »

gas_balloon wrote: Tue Jan 25, 2022 10:40 pm
FoolMeOnce wrote: Tue Jan 25, 2022 10:38 pm Is TT prompting you to fill in information about the gifts, or are you proactively trying to report this? If the former, what answers are you giving that trigger the prompt?
I'm trying to proactively report. We decided to max out gifts to the child going forward each year to reduce the tax liability on inheritance in future.
I don't think you have to report anything because you gifted less than the annual exclusion.
User avatar
winterfan
Posts: 826
Joined: Mon Jan 05, 2015 10:06 am

Re: Dividing gifts to child between both spouses

Post by winterfan »

I don't believe gift reporting is available in TT. I had to file a 709 last year for a gift over the limit and I had to fill it out by hand and mail to the IRS.
User avatar
HueyLD
Posts: 9789
Joined: Mon Jan 14, 2008 9:30 am

Re: Dividing gifts to child between both spouses

Post by HueyLD »

winterfan wrote: Wed Jan 26, 2022 6:49 am I don't believe gift reporting is available in TT. I had to file a 709 last year for a gift over the limit and I had to fill it out by hand and mail to the IRS.
See my post above for the ProSeries.
User avatar
winterfan
Posts: 826
Joined: Mon Jan 05, 2015 10:06 am

Re: Dividing gifts to child between both spouses

Post by winterfan »

HueyLD wrote: Wed Jan 26, 2022 6:56 am
winterfan wrote: Wed Jan 26, 2022 6:49 am I don't believe gift reporting is available in TT. I had to file a 709 last year for a gift over the limit and I had to fill it out by hand and mail to the IRS.
See my post above for the ProSeries.
Oh, I missed that! Good to know, although I hope I never have to fill it out for a while!
WapelloHawk
Posts: 265
Joined: Thu Apr 08, 2021 4:22 pm

Re: Dividing gifts to child between both spouses

Post by WapelloHawk »

My understanding on this topic:

1. TurboTax does not support form 709. You will have to complete form 709 by hand and mail it to Kansas City IRS office.
2. If you and your spouse combine to give over the single person annual exclusion (ie, has been $15,000 and is now $16,000), you each need to complete form 709 and attest that you are splitting the gift with the other spouse. So, giving $20,000 total will split into $10,000 each and fall safely under the exclusion.

I have three years of completing form 709 under my belt now. It isn’t the easiest form the first time around, but now my record keeping is better and I have duplicated the supplemental forms explained in the IRS instructions so each new year is more or less a repeat of the prior year in terms of completing the form.
ktdintex
Posts: 208
Joined: Sun Apr 04, 2021 7:42 am

Re: Dividing gifts to child between both spouses

Post by ktdintex »

As someone on the receiving end of parents gifting investments, the only thing I would add is to keep a record of the cost basis for anything you gift to your child in a separate folder that can be given to him / her at the appropriate time (if you aren't already doing this).

My wife was gifted various stocks over time before we were married (25+ years ago) from her parents. Her parents kept very spotty records, and for some of the stocks they literally have no records at all. Some were DRIPs (dividend reinvestment programs), and all of these stocks were purchased back in the 1980's and 1990's. Needless to say it's been complicated to impossible to figure out the exact cost basis if we wanted to sell any of them.

I'm not complaining because it was obviously very generous of her parents to be thinking ahead for her future. Just wanted to pass along my experience in case it helps.
User avatar
HueyLD
Posts: 9789
Joined: Mon Jan 14, 2008 9:30 am

Re: Dividing gifts to child between both spouses

Post by HueyLD »

WapelloHawk wrote: Wed Jan 26, 2022 7:34 am My understanding on this topic:

1. TurboTax does not support form 709. You will have to complete form 709 by hand and mail it to Kansas City IRS office.
TurboTax does support form 709. You just have to get the ProSeries and it will cost you an arm and a leg.

https://proconnect.intuit.com/proseries ... -products/
User avatar
Topic Author
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Dividing gifts to child between both spouses

Post by fetch5482 »

Thanks everyone. I'll look into manually filling form 709. If there are any resources that can help me fill it please do point me to it, otherwise I'll try and carefully read the form and fill it in my own.

I'm not where near 11.7 million either, but I suspect I'll reach there in the next 15-20 years, so we decided to proactively start giving our child the maximum amount starting this year.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
User avatar
JazzTime
Posts: 724
Joined: Mon Oct 25, 2021 8:43 am
Location: MA

Re: Dividing gifts to child between both spouses

Post by JazzTime »

You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
User avatar
JazzTime
Posts: 724
Joined: Mon Oct 25, 2021 8:43 am
Location: MA

Re: Dividing gifts to child between both spouses

Post by JazzTime »

ktdintex wrote: Wed Jan 26, 2022 7:46 am As someone on the receiving end of parents gifting investments, the only thing I would add is to keep a record of the cost basis for anything you gift to your child in a separate folder that can be given to him / her at the appropriate time (if you aren't already doing this).

My wife was gifted various stocks over time before we were married (25+ years ago) from her parents. Her parents kept very spotty records, and for some of the stocks they literally have no records at all. Some were DRIPs (dividend reinvestment programs), and all of these stocks were purchased back in the 1980's and 1990's. Needless to say it's been complicated to impossible to figure out the exact cost basis if we wanted to sell any of them.

I'm not complaining because it was obviously very generous of her parents to be thinking ahead for her future. Just wanted to pass along my experience in case it helps.
When my wife and I gifted stock to our son a while back, the transfer was easy and straightforward - from our Fido account to his Fido account. And Fido transferred the cost basis as well, so no future issues.

In your situation, it will likely be impossible to get an absolutely correct cost basis for shares transferred many years ago. Fortunately, if you sell those shares today, the cost basis of those shares is not reported by your brokerage firm to the IRS. So you have the flexibility to make your best effort to estimate the cost basis and report that on your Sched. D (or whatever the form is now). Just report the purchase date as "various" and give it your best estimate on cost basis. It is doubtful the IRS will question it unless you are reporting very large transactions.

I ran into an analogous situation years ago. When my MIL died, I had to scrounge around to find all her assets. She had invested a small amount in some security (I think it was RPM) and signed up for their DRIP plan. But everything was done outside of her brokerage account. So I had to try to figure out what her cost basis was because her total investment had grown rather nicely (illustrating the value of reinvesting). Luckily, I found a notebook of hers where she actually wrote down each dividend and the additional shares purchased. So lesson is: DRIP investing is great, but do it inside a brokerage account so the brokerage house tracks the cost basis.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
User avatar
Topic Author
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Dividing gifts to child between both spouses

Post by fetch5482 »

JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.
I'm really confused now with what TurboTax means from the link don't that I quoted
One spouse, for example, could give $30,000 to his son without triggering the gift tax if the other spouse agrees not to give the son any gift that year. Although no tax is due in this situation, the first spouse would be required to file a gift tax return indicating that the second spouse had agreed to split the gift.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
User avatar
JazzTime
Posts: 724
Joined: Mon Oct 25, 2021 8:43 am
Location: MA

Re: Dividing gifts to child between both spouses

Post by JazzTime »

gas_balloon wrote: Wed Jan 26, 2022 9:28 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.
I'm really confused now with what TurboTax means from the link don't that I quoted
One spouse, for example, could give $30,000 to his son without triggering the gift tax if the other spouse agrees not to give the son any gift that year. Although no tax is due in this situation, the first spouse would be required to file a gift tax return indicating that the second spouse had agreed to split the gift.
I'm not sure what TT is doing here. First of all, TT does not do 709 forms, so I question it from the get go. Second, their advice is at least partially if not wholly incorrect. Form 709 instructions are clear: if one spouse files a 709 indicating that a gift is split with the other spouse, then the other spouse MUST also file a 709 indicating the same split gift.

Arguably, if one spouse writes a check on his/her SOLE account for $30K, then there may be a technical reason to file form 709 to indicate a split gift. That would not be the case if the check is written on a joint account. In any event, it is highly doubtful that the IRS is going to concern itself with the very minor technical infraction (if it is a technical infraction) since there is no tax due in any event. It would make no sense to chase down minor paperwork infractions in order to collect zero tax.

It only makes sense to file a 709 if you make a combined gift that exceeds the exclusion. The only purpose for this filing is to make a paperwork history that tracks all of your gifts over a lifetime (in excess of the annual exclusion) so that those lifetime gifts can be subtracted from you final estate exemption. If your estate does not exceed the exemption (now something like $12M), then it all amounts to a non-event.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
WapelloHawk
Posts: 265
Joined: Thu Apr 08, 2021 4:22 pm

Re: Dividing gifts to child between both spouses

Post by WapelloHawk »

JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork. I think completing the forms (mine and wife's) is busy work considering I aim to fall under the exclusion in the end.

I agree that the IRS instructions are pretty poor.
User avatar
Topic Author
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Dividing gifts to child between both spouses

Post by fetch5482 »

WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork. I think completing the forms (mine and wife's) is busy work considering I aim to fall under the exclusion in the end.

I agree that the IRS instructions are pretty poor.
Thanks, have you found a good resource on how to fill the form in your situation, or did you just do it by reading the form instructions?

I'm in the same boat, I don't want to give IRS any reason to tax my estate after I'm gone.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
WapelloHawk
Posts: 265
Joined: Thu Apr 08, 2021 4:22 pm

Re: Dividing gifts to child between both spouses

Post by WapelloHawk »

gas_balloon wrote: Wed Jan 26, 2022 10:01 am
WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork. I think completing the forms (mine and wife's) is busy work considering I aim to fall under the exclusion in the end.

I agree that the IRS instructions are pretty poor.
Thanks, have you found a good resource on how to fill the form in your situation, or did you just do it by reading the form instructions?

I'm in the same boat, I don't want to give IRS any reason to tax my estate after I'm gone.
I looked but never found a good resource. Below is my procedure, hope it helps you:

I keep up with two Excel documents throughout the year. One for each of my children. The docs are basically a ledger of the gift amounts and dates during the year. The IRS instructions state you need to include the donee's name, relationship to donor, and address, so I have that info at the top of each Excel page.

Then I replicated the Form 709 Schedule B (the IRS instructions explain this form) that I update each year. The end result of the schedule is to document how much you and your wife ate into your lifetime exemption each year. Basically each year gets a new line and you have to update the data with the current tax year exclusion, etc. Schedule B is the hardest part of the procedure each year since I basically have to re-familiarize myself with how to complete it.

The Schedule B data gets entered into form 709 (you can download the PDF from the IRS website). The form for me and my wife are mirror images except for changing up our names. You each will attest that you are splitting the gifts.

I submit two packets each year (one for me and one for wife). Each packet includes the 709, the two Excel docs for my kids, and the Schedule B. Each packet is complete with all the documents since the 709 is an individual's tax form and you aren't submitting as a married couple filing jointly. The IRS does want each packet (mine and wife) to be in the same envelope.

We will both be over our lifetime gift tax exemptions, so keeping this updated with the IRS is something I want to get right.

Hope this helps. I wish regular TurboTax would include form 709.
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Dividing gifts to child between both spouses

Post by Lee_WSP »

The only reason you'd need to file is if you had to split the gift, which I'm not sure you need to do. It's it a joint trust? Joint account? Community property?
User avatar
FreddieFIRE
Posts: 826
Joined: Tue Aug 03, 2021 11:49 am

Re: Dividing gifts to child between both spouses

Post by FreddieFIRE »

^^^this. We've had these discussions in the past, and the general consensus has been that it doesn't matter who writes what checks. If the funds come out of a jointly owned account and/or are from a married couple living in a community property state (unless they are from properly segregated individually owned assets), then the gifts are considered 50% from one spouse and 50% from the other. I personally wouldn't file a form 709 in this situation. (I am not a lawyer)
A house and a job. Once the American dream. Two things I'll never again have. Life is simple (and good).
User avatar
JazzTime
Posts: 724
Joined: Mon Oct 25, 2021 8:43 am
Location: MA

Re: Dividing gifts to child between both spouses

Post by JazzTime »

WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork. I think completing the forms (mine and wife's) is busy work considering I aim to fall under the exclusion in the end.

I agree that the IRS instructions are pretty poor.
The first part of the colored text is true. Where you go wrong is that a married couple gifting $30K is not splitting anything. They are EACH gifting $15K. Who writes the check or whether you write two checks is irrelevant. Let's say you withdraw $30K of cash from your account. You divide the cash in half. Then you and your spouse each take $15K in cash and hand it to your child. Neither of you have split anything and your respective gifts fall under the exclusion. No 709 required. It's no different if you write a check or make an electronic transfer (at least out of a joint account).

It's important to understand that the person signing the check may not be the person making a gift or any other payment. If I ask my wife to send a check to my nephew, the gift is mine not hers. She is simply carrying out my instruction and is using her signing authorization under our joint account. So a check for $30K is a gift from both of us. It's not a split gift. It's a gift of $15K from each of us since that was our intention.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
User avatar
JazzTime
Posts: 724
Joined: Mon Oct 25, 2021 8:43 am
Location: MA

Re: Dividing gifts to child between both spouses

Post by JazzTime »

WapelloHawk wrote: Wed Jan 26, 2022 10:22 am
I looked but never found a good resource. Below is my procedure, hope it helps you:

I keep up with two Excel documents throughout the year. One for each of my children. The docs are basically a ledger of the gift amounts and dates during the year. The IRS instructions state you need to include the donee's name, relationship to donor, and address, so I have that info at the top of each Excel page.

Then I replicated the Form 709 Schedule B (the IRS instructions explain this form) that I update each year. The end result of the schedule is to document how much you and your wife ate into your lifetime exemption each year. Basically each year gets a new line and you have to update the data with the current tax year exclusion, etc. Schedule B is the hardest part of the procedure each year since I basically have to re-familiarize myself with how to complete it.

The Schedule B data gets entered into form 709 (you can download the PDF from the IRS website). The form for me and my wife are mirror images except for changing up our names. You each will attest that you are splitting the gifts.

I submit two packets each year (one for me and one for wife). Each packet includes the 709, the two Excel docs for my kids, and the Schedule B. Each packet is complete with all the documents since the 709 is an individual's tax form and you aren't submitting as a married couple filing jointly. The IRS does want each packet (mine and wife) to be in the same envelope.

We will both be over our lifetime gift tax exemptions, so keeping this updated with the IRS is something I want to get right.

Hope this helps. I wish regular TurboTax would include form 709.
I assume you are following this extraordinary procedure because you are making gifts that exceed the annual exclusion. This procedure would not be necessary for gifts falling below the annual exclusion. So an individual could gift $15K (now $16K) to each of 10 different people (total gifts of $150K) and not file anything. A couple could double that amount - $30K (now $32K) each. As I said in an earlier comment, my wife and I filed a 709 only in the year we made a substantial gift of stock to our son. It was a one time gift in a single transaction so there was no need to track it on a spreadsheet.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
User avatar
JazzTime
Posts: 724
Joined: Mon Oct 25, 2021 8:43 am
Location: MA

Re: Dividing gifts to child between both spouses

Post by JazzTime »

Hypothetical example to make a point.

My wife and I hire an attorney and give him a POA to access our joint account. We do this so he can make a variety of payments on our behalf - e.g., gifts to charity. We send him a letter: "Dear Attorney X, please kindly gift $30K to our son, i.e. $15K from each of us, in accordance with the IRS gift exclusion." Attorney X writes a check for $30K and sends it to our son.

This is not a gift from the attorney simply because he wrote the check and mailed it. It is a gift from each of us according to our instructions. He simply carried out our instructions acting as our attorney. Because the gift from each of us is within the exclusion, no 709 is required. There is no split gift.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Dividing gifts to child between both spouses

Post by Lee_WSP »

JazzTime wrote: Wed Jan 26, 2022 2:14 pm Hypothetical example to make a point.

My wife and I hire an attorney and give him a POA to access our joint account. We do this so he can make a variety of payments on our behalf - e.g., gifts to charity. We send him a letter: "Dear Attorney X, please kindly gift $30K to our son, i.e. $15K from each of us, in accordance with the IRS gift exclusion." Attorney X writes a check for $30K and sends it to our son.

This is not a gift from the attorney simply because he wrote the check and mailed it. It is a gift from each of us according to our instructions. He simply carried out our instructions acting as our attorney. Because the gift from each of us is within the exclusion, no 709 is required. There is no split gift.
The attorney would write two checks from each individual account per your instructions. But otherwise, the analogy holds.
capran
Posts: 1091
Joined: Thu Feb 18, 2016 9:45 am

Re: Dividing gifts to child between both spouses

Post by capran »

WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork. I think completing the forms (mine and wife's) is busy work considering I aim to fall under the exclusion in the end.

I agree that the IRS instructions are pretty poor.
From the IRS web site re: form 709 https://www.irs.gov/instructions/i709 it simply says:
"Who does not need to file. If you meet all of the following requirements, you are not required to file Form 709.
You made no gifts during the year to your spouse.
You did not give more than $15,000 to any one donee.
All the gifts you made were of present interests.


If you write one check for 30,000 from a joint account, or write two checks of 15,000, either way it seems you are not required to file a 709 because in either case, a single check from a joint account is considered split between the joint account holders, which is 15k and 15k. In the case of two separately signed checks from a joint account, then each check if viewed as "split/shared" from each check, each spouse is deemed as having contributed 7,500 of each of the two checks, which again totals 15,000 total from each joint account holder.

Is the consensus of the responders that a 709 is not required? If one were to hand over actual cash, does that change the equation. In what situation might this even be an issue? We will never be above 5 mil, let alone the 11 million level.
MarkNYC
Posts: 2999
Joined: Mon May 05, 2008 7:58 pm

Re: Dividing gifts to child between both spouses

Post by MarkNYC »

WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork.
JazzTime is correct. At IRS.gov there is a section "Frequently asked questions about gift tax." One question is "What if my spouse and I want to give away property that we own together?" The IRS answer is:

"You are each entitled to the annual exclusion amount on the gift. Together, you can give $22K to each donee (2002-2005)... In 2022, the total for you and your spouse is $32K."

Many incorrectly believe the allocation of a gift of joint property equally to both spouses is "gift splitting." It is not. "Gift splitting" is an affirmative election made on a filed gift tax return where the spouses consent to treat all gifts during the year by both spouses as made 50% by each spouse.
capran
Posts: 1091
Joined: Thu Feb 18, 2016 9:45 am

Re: Dividing gifts to child between both spouses

Post by capran »

MarkNYC wrote: Thu Jan 27, 2022 12:53 pm
WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork.
JazzTime is correct. At IRS.gov there is a section "Frequently asked questions about gift tax." One question is "What if my spouse and I want to give away property that we own together?" The IRS answer is:

"You are each entitled to the annual exclusion amount on the gift. Together, you can give $22K to each donee (2002-2005)... In 2022, the total for you and your spouse is $32K."

Many incorrectly believe the allocation of a gift of joint property equally to both spouses is "gift splitting." It is not. "Gift splitting" is an affirmative election made on a filed gift tax return where the spouses consent to treat all gifts during the year by both spouses as made 50% by each spouse.
So you are saying that even if one spouse gifts 15,000 and the other spouse gifts 15,000 that they are required to fill out the 709?
wfrobinette
Posts: 1879
Joined: Fri Feb 20, 2015 2:14 pm

Re: Dividing gifts to child between both spouses

Post by wfrobinette »

gas_balloon wrote: Tue Jan 25, 2022 10:40 pm
FoolMeOnce wrote: Tue Jan 25, 2022 10:38 pm Is TT prompting you to fill in information about the gifts, or are you proactively trying to report this? If the former, what answers are you giving that trigger the prompt?
I'm trying to proactively report. We decided to max out gifts to the child going forward each year to reduce the tax liability on inheritance in future.
Everything I state here is for federal taxes.

Stay within the 30K (15 each spouse) in 2021, 32k in 2022 and whatever each year allows and there is no reporting to be done ever. From what I read you can accelerate the gifts too. Say you each give your kid 50k a year and file the gift tax form 35k will subtract from 11.7 million exclusion. 23.4 mil for the couple. It goes up to 12.06 each this year. I'm pretty sure you only need to file in amounts over the annual exclusion.

Theoretically you could give your kid 23.4 million today. File the gift tax form and you're done with your life-time exclusion until the limits are increased.

You could also gift your kid your lifetime gift exclusion upon your death. Then the surviving spouse can do that upon thier death. The risk there is the limits might be decreased.

So nickel and diming $30k a year to reduce future inheritance tax may not be your best approach.

As always check with your accountant but I feel that a lot of folks truly don't understand gifting and the tax code around it.
wfrobinette
Posts: 1879
Joined: Fri Feb 20, 2015 2:14 pm

Re: Dividing gifts to child between both spouses

Post by wfrobinette »

capran wrote: Thu Jan 27, 2022 2:47 pm
MarkNYC wrote: Thu Jan 27, 2022 12:53 pm
WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork.
JazzTime is correct. At IRS.gov there is a section "Frequently asked questions about gift tax." One question is "What if my spouse and I want to give away property that we own together?" The IRS answer is:

"You are each entitled to the annual exclusion amount on the gift. Together, you can give $22K to each donee (2002-2005)... In 2022, the total for you and your spouse is $32K."

Many incorrectly believe the allocation of a gift of joint property equally to both spouses is "gift splitting." It is not. "Gift splitting" is an affirmative election made on a filed gift tax return where the spouses consent to treat all gifts during the year by both spouses as made 50% by each spouse.
So you are saying that even if one spouse gifts 15,000 and the other spouse gifts 15,000 that they are required to fill out the 709?
That's not what he is saying.
WapelloHawk
Posts: 265
Joined: Thu Apr 08, 2021 4:22 pm

Re: Dividing gifts to child between both spouses

Post by WapelloHawk »

MarkNYC wrote: Thu Jan 27, 2022 12:53 pm
WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork.
JazzTime is correct. At IRS.gov there is a section "Frequently asked questions about gift tax." One question is "What if my spouse and I want to give away property that we own together?" The IRS answer is:

"You are each entitled to the annual exclusion amount on the gift. Together, you can give $22K to each donee (2002-2005)... In 2022, the total for you and your spouse is $32K."

Many incorrectly believe the allocation of a gift of joint property equally to both spouses is "gift splitting." It is not. "Gift splitting" is an affirmative election made on a filed gift tax return where the spouses consent to treat all gifts during the year by both spouses as made 50% by each spouse.
Mark

Thanks for your input. I have read (and re-read, lol) your comments in the thread from about a year ago on this topic. I have a specific question:

My wife and I gifted from our Joint Accounts (in Tennessee, not community property state), about $50k to each of our children in 2021. On our individual 709, should we state our individual gift was $25k and also say "no" to the gift splitting question (we essentially divide the total gift in half before we complete our 709). Or, should we say the gift was $50k, and say "yes" to the gift splitting question?

The end result is the same. We each eat into our lifetime exemption by $10k ($25k - $15k). But the form is completed differently to get to that same result.

Thanks for any advice.
MarkNYC
Posts: 2999
Joined: Mon May 05, 2008 7:58 pm

Re: Dividing gifts to child between both spouses

Post by MarkNYC »

WapelloHawk wrote: Thu Jan 27, 2022 4:21 pm
MarkNYC wrote: Thu Jan 27, 2022 12:53 pm
WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork.
JazzTime is correct. At IRS.gov there is a section "Frequently asked questions about gift tax." One question is "What if my spouse and I want to give away property that we own together?" The IRS answer is:

"You are each entitled to the annual exclusion amount on the gift. Together, you can give $22K to each donee (2002-2005)... In 2022, the total for you and your spouse is $32K."

Many incorrectly believe the allocation of a gift of joint property equally to both spouses is "gift splitting." It is not. "Gift splitting" is an affirmative election made on a filed gift tax return where the spouses consent to treat all gifts during the year by both spouses as made 50% by each spouse.
Mark

Thanks for your input. I have read (and re-read, lol) your comments in the thread from about a year ago on this topic. I have a specific question:

My wife and I gifted from our Joint Accounts (in Tennessee, not community property state), about $50k to each of our children in 2021. On our individual 709, should we state our individual gift was $25k and also say "no" to the gift splitting question (we essentially divide the total gift in half before we complete our 709). Or, should we say the gift was $50k, and say "yes" to the gift splitting question?

The end result is the same. We each eat into our lifetime exemption by $10k ($25k - $15k). But the form is completed differently to get to that same result.

Thanks for any advice.
Each of you should list a $25K gift to the donee, reduced by the $15K exclusion. No reason to elect gift splitting, since the IRS will presume the gift from the joint account is 50% from each spouse.
WapelloHawk
Posts: 265
Joined: Thu Apr 08, 2021 4:22 pm

Re: Dividing gifts to child between both spouses

Post by WapelloHawk »

MarkNYC wrote: Thu Jan 27, 2022 4:32 pm
WapelloHawk wrote: Thu Jan 27, 2022 4:21 pm
MarkNYC wrote: Thu Jan 27, 2022 12:53 pm
WapelloHawk wrote: Wed Jan 26, 2022 9:52 am
JazzTime wrote: Wed Jan 26, 2022 8:37 am You do NOT need to file form 709. Your combined gift falls within the exception.

My wife and I gift $30K to our son and DIL every year. We write one check to each. We do not file form 709.

The only time we filed form 709 was the year we made a one-time large gift of stock. That was a pain in the butt because when you file form 709, you have to list ALL gifts, including those under the exclusion. And if you choose to split a gift, then you have to split all gifts, and both of us had to file form 709 to show the split gifts. The instructions for completing form 709 leave a lot to be desired (as with most IRS instructions).
I wish this were true, but I don't believe it is. My wife and I essentially gift exactly what you are gifting to our grown kids.

The IRS instructions, TurboTax questions and answers, and Investopedia all state that if you split a gift with your spouse, you must file a 709 for both you and your spouse. By definition, in order to gift $30k and have it fall under the personal exclusion, a married couple is splitting the gift. Form 709 is an individual's form.

If you have something to point me to that states otherwise, please share it. I would gladly give up spending a few hours each year on the 709 form and paperwork.
JazzTime is correct. At IRS.gov there is a section "Frequently asked questions about gift tax." One question is "What if my spouse and I want to give away property that we own together?" The IRS answer is:

"You are each entitled to the annual exclusion amount on the gift. Together, you can give $22K to each donee (2002-2005)... In 2022, the total for you and your spouse is $32K."

Many incorrectly believe the allocation of a gift of joint property equally to both spouses is "gift splitting." It is not. "Gift splitting" is an affirmative election made on a filed gift tax return where the spouses consent to treat all gifts during the year by both spouses as made 50% by each spouse.
Mark

Thanks for your input. I have read (and re-read, lol) your comments in the thread from about a year ago on this topic. I have a specific question:

My wife and I gifted from our Joint Accounts (in Tennessee, not community property state), about $50k to each of our children in 2021. On our individual 709, should we state our individual gift was $25k and also say "no" to the gift splitting question (we essentially divide the total gift in half before we complete our 709). Or, should we say the gift was $50k, and say "yes" to the gift splitting question?

The end result is the same. We each eat into our lifetime exemption by $10k ($25k - $15k). But the form is completed differently to get to that same result.

Thanks for any advice.
Each of you should list a $25K gift to the donee, reduced by the $15K exclusion. No reason to elect gift splitting, since the IRS will presume the gift from the joint account is 50% from each spouse.
Thank you. I really appreciate your advice. Hope the IRS never gives you a call due to my returns after I list you as my tax advisor (Kidding!)
Post Reply