From which accounts should my mom gift a large sum of money?

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cyclist
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Re: From which accounts should my mom gift a large sum of money?

Post by cyclist »

I have no idea what the OP will decide to do, but I must say that I'm gratified to be part of a Boglehead community that is so consistently providing clear advice aimed at protecting both the OP and his mother.

There are a lot of very good people on this forum.

Cyclist
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VINNY
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Re: From which accounts should my mom gift a large sum of money?

Post by VINNY »

I should've elaborated on my original post that the money my mom will be gifting us is being set aside in an account earmarked as "hers" so that it can be used specifically for her until her last day. We have a plan already in place so that my mom doesn't run out of money, if I could've anticipated all the well intentioned comments concerning her financial and mental well being, I would've mentioned the account where we are earmarking it as hers.

My mom has already made gifts to us in the past, and every single gift was taken and placed into this separate account earmarked for my mom, from all of us. We put this plan in place several years ago because none of us (my siblings and I) are comfortable taking these huge sums of cash from my mom while she is still alive. We are very well aware that as she ages, this money couldbe needed for her care. So it's being set aside.

We told my mom we created this account and tell her it's her money. I remind her of this because I believe until she passes, it's still her money not ours. If we were talking gifts of $500.00 or $1,000 there would be a lot less guilt or anxiety over this.

My parents were hard working immigrants that busted their butts and made many sacrifice's in the name of their children. This puts even more guilt on us because my parents unfortunately didn't really get to enjoy their money. This makes us want to be good stewards of their money because we are well aware of the sacrifices they made. My mom is simply content with leaving it to her children, this was my dad's mentality and my moms as well. We can't change that. I would love nothing more than for my dad to be alive, so that he and my mom, could enjoy the fruits of their labor. They grew up during the great depression and only knew how to save. ALL of us have encouraged her to go to Europe and visit family, but it always falls on deaf ears. She is content living a very simple life.

What we've done because of this, is take mom on our vacations so that she can get out of the house and it makes us feel better. Although she insists on paying, we will not allow that because we're uncomfortable doing so, the same as taking these gifts. Which is why, they are being placed in a separate account. Many will say let her pay, but I personally have huge guilt doing so.

None of us need the money or are salivating with our hands out in anticipation. If my mom asked for her money tomorrow, the only delay would be the time it takes Vanguard to transfer it back.

As for the trust, it was created decades ago and we realize now that it wasn't even necessary so it's being depleted.

As for the remaining two accounts, there are no gains, just those losses I posted.

My intentions were to withdraw the money from the taxable accounts that have losses. The IRA will remain untouched as those distributions will affect her Medicare premiums. The other accounts will not since they have no gains.

I figured I'd double check with the smart people here just to make certain, I was doing things correctly.

Thanks for all the responses, my mother is in good hands.
biscuits
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Re: From which accounts should my mom gift a large sum of money?

Post by biscuits »

You've gotten a lot of good advice and seem to have your mind made up on your original plan, but here's my two cents:

As a 67 yo widowed mom with assets in multiples of your mother's, I would never do this. I hope to leave a legacy for my kids, but my kids are doing fine and tell me to enjoy life and take care of myself and that is what I am doing, while also planning to be as little a burden to them as possible, should I become disabled. However, I really enjoy picking up the tab when we go out to dinner, travel, go to a spa, or whatever. Sometimes they pick up the tab, but I do when I get to it first. Maybe you could let your mother pick up the tab for some of your fun times, and show her a whole lot of appreciation for that, and then she wouldn't feel so driven to disburse this money now. Ultimately, it is more advantageous to her heirs, tax-wise, to inherit later at a stepped-up cost basis. Maybe that fact is beyond her understanding, but you all could keep it in mind, and let her do smaller, generous things now that would have meaning to her and to you and give her the warm feeling that she is still looking after her kids and grand-kids.

All this unnecessary moving money around from accounts and from mom to you, and possibly back to mom again, is likely, as others have pointed out, to cause tax problems for you and for her, and possibly unforeseen problems among heirs. Suppose mom has a crisis and needs this money, but one heir has spent it and another has not? Suppose one of her heirs has their own crisis and really needs extra help--mom may not be able to give it. Her plan, while well-intentioned, is not a good plan in so many ways.
SuzBanyan
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Re: From which accounts should my mom gift a large sum of money?

Post by SuzBanyan »

I’m confused about what the OP is doing. Mom is making 13 gifts of $17K to 13 family members. Are each of those gifts going into 13 separate accounts? If not, and the gifts are going into a single account, a gift tax return will likely be needed. Who will be the nominal owner of this new account?
HomeStretch
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Re: From which accounts should my mom gift a large sum of money?

Post by HomeStretch »

What is the purpose of giving these gifts to one account for the potential future care of your mom? Is the intent to remove assets from her name in case Medicaid LTC benefits need to be applied for in the future?

The fact that you say your mom knows the money in the account is earmarked as “hers” and she can ask for (and receive back) “her” money returned to her sheds doubt on this as qualifying as true gifts according to IRS regulations.

This is not meant to shed doubt on your good intentions. I just don’t think these sound like valid gifts. And that’s without considering whose name(s) is/are on the account holding the funds and whether your mom should be making “gifts” at all.
afan
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Re: From which accounts should my mom gift a large sum of money?

Post by afan »

Two possibilities, both bad

1. Mom knows but has not told the OP about a fatal diagnosis. Mom will not live long enough to run out of money, even if she gives away the amount proposed. Even accounting for a few years of high healthcare expenses, she may have plenty. I would look closely at the figures, since long term care treatments not covered by health insurance can add up quickly. This is part of the reason so many of us are pushing back against the idea of accepting the money. She could be cognitively intact but in possession of facts not at your disposal. In this case, her decision could be rational. I still would not take the money but I could see how the plan might not be financially catastrophic.

2. Mom is experiencing cognitive decline and is unable to understand the implications of her decision. If so, it is up to the family to protect her from herself.
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afan
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Re: From which accounts should my mom gift a large sum of money?

Post by afan »

HomeStretch wrote: Sun Jan 29, 2023 3:24 pm What is the purpose of giving these gifts to one account for the potential future care of your mom? Is the intent to remove assets from her name in case Medicaid LTC benefits need to be applied for in the future?

The fact that you say your mom knows the money in the account is earmarked as “hers” and she can ask for (and receive back) “her” money returned to her sheds doubt on this as qualifying as true gifts according to IRS regulations.

This is not meant to shed doubt on your good intentions. I just don’t think these sound like valid gifts. And that’s without considering whose name(s) is/are on the account holding the funds and whether your mom should be making “gifts” at all.
And who is the owner of this account? Are their 13 owners-all of the kids and grandchildren? If so, then this not not her money, it belongs to the owners of the account. Among other things, it is subject to the claims of creditors of all 13 people. If one were to be sued, mom and all the recipients of these gifts could be out the money.
If there are fewer than 13 owners, who owns the account?
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celia
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Re: From which accounts should my mom gift a large sum of money?

Post by celia »

VINNY wrote: Sun Jan 29, 2023 12:28 pm My mom has already made gifts to us in the past, and every single gift was taken and placed into this separate account earmarked for my mom, from all of us. We put this plan in place several years ago because none of us (my siblings and I) are comfortable taking these huge sums of cash from my mom while she is still alive. We are very well aware that as she ages, this money couldbe needed for her care. So it's being set aside.
I don’t understand the part of how the money is being “saved for her”. To keep up with inflation and her needs in 10, 20, or 30 years, it should be invested like it was in Taxable, not be sitting in cash. Then, the question becomes, who is paying the taxes on the dividends and growth in the account each year? That seems like it would impact the tax return of 13 people.

I wouldn’t want to be any of the 13, since I want to be able to control my own taxes with my spouse.

Has a lawyer or investment advisor “approved” this plan? It sounds like you could be skirting the IRS too.

VINNY wrote: Sun Jan 29, 2023 12:28 pm My intentions were to withdraw the money from the taxable accounts that have losses. The IRA will remain untouched as those distributions will affect her Medicare premiums. The other accounts will not since they have no gains.
If she is 72 this year, RMDs are REQUIRED. It has to be moved to Taxable and have taxes paid on it unless she is donating it to charity by using a QCD. It doesn’t matter where the income comes from, but if she ends up being subject to IRMAA, she is subject to it.

This also sounds like you are helping her skirt the IRMAA rules by putting her money in the name of others. You should seek legal help before things get worse.
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Re: From which accounts should my mom gift a large sum of money?

Post by tunafish »

Rocky Mtn Man wrote: Sun Jan 29, 2023 10:36 am Sometimes giving away large sums of money or valued possessions is an indication of a mental health crisis and possible future self-harm.
Oh, geez. I've heard of that.
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White Coat Investor
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Re: From which accounts should my mom gift a large sum of money?

Post by White Coat Investor »

VINNY wrote: Sat Jan 28, 2023 8:39 pm My mother would like to gift money to her children and grandchildren this year, $17,000 to each person, $221,000 in total.

My mother is a 72 year old widow, and her income is approximately $40,000 per year which is social security and a pension.

I will list the following accounts that she owns, and I would like to know from which accounts should she sell in order to gift this money. What is the most advantageous way of accomplishing this based on the following accounts she owns, all of them are with Vanguard.

1. Vanguard Brokerage account: $409,933.42
- Total Bond Market Index $120,273.95 (down $-18,299)
-Total Stock Market Index $271, 399.99 (down $-23,000)

2. Revocable Living Trust Account: $75,847.11
-Total Bond Market Index $50,532.47 (down $-3,964)
-Total Stock Market Index $25, 314.64 (UP $+4,777)


Thanks!!!
Vinny
That's a big gift.

Doesn't really matter much where it comes from. I'd sell something with a loss and give cash. Although perhaps the recipient would also benefit from the loss even more down the road.
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Re: From which accounts should my mom gift a large sum of money?

Post by White Coat Investor »

afan wrote: Sun Jan 29, 2023 4:23 pm Two possibilities, both bad

1. Mom knows but has not told the OP about a fatal diagnosis. Mom will not live long enough to run out of money, even if she gives away the amount proposed. Even accounting for a few years of high healthcare expenses, she may have plenty. I would look closely at the figures, since long term care treatments not covered by health insurance can add up quickly. This is part of the reason so many of us are pushing back against the idea of accepting the money. She could be cognitively intact but in possession of facts not at your disposal. In this case, her decision could be rational. I still would not take the money but I could see how the plan might not be financially catastrophic.

2. Mom is experiencing cognitive decline and is unable to understand the implications of her decision. If so, it is up to the family to protect her from herself.
3. Mom is perfectly content living on the pension and SS and this money is just extra. She prefers to give with warm hands than cold.
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afan
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Re: From which accounts should my mom gift a large sum of money?

Post by afan »

White Coat Investor wrote: Sun Jan 29, 2023 5:04 pm
afan wrote: Sun Jan 29, 2023 4:23 pm Two possibilities, both bad

1. Mom knows but has not told the OP about a fatal diagnosis. Mom will not live long enough to run out of money, even if she gives away the amount proposed. Even accounting for a few years of high healthcare expenses, she may have plenty. I would look closely at the figures, since long term care treatments not covered by health insurance can add up quickly. This is part of the reason so many of us are pushing back against the idea of accepting the money. She could be cognitively intact but in possession of facts not at your disposal. In this case, her decision could be rational. I still would not take the money but I could see how the plan might not be financially catastrophic.

2. Mom is experiencing cognitive decline and is unable to understand the implications of her decision. If so, it is up to the family to protect her from herself.
3. Mom is perfectly content living on the pension and SS and this money is just extra. She prefers to give with warm hands than cold.
That only works so long as her expenses stay low. At her age, she could face costly healthcare needs. If so, she will need that money.
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Silentnight
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Re: From which accounts should my mom gift a large sum of money?

Post by Silentnight »

celia wrote: Sun Jan 29, 2023 4:43 pm If she is 72 this year, RMDs are REQUIRED. It has to be moved to Taxable and have taxes paid on it unless she is donating it to charity by using a QCD. It doesn’t matter where the income comes from, but if she ends up being subject to IRMAA, she is subject to it.
https://www.schwab.com/learn/story/cong ... nt-savings
In its final act of 2022, Congress approved a massive year-end spending bill that includes a set of bipartisan enhancements to retirement savings.

The retirement package, known as SECURE Act 2.0, ...........

The most notable provision in the new bill increases the age at which individuals must begin taking required minimum distributions (RMDs) from their retirement account to 73 from 72, beginning January 1, 2023. In 2033, the RMD age will increase again, to 75.

What year did she turn 72? If she turns 72 in 2023 she doesn't start RMDs yet.
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Re: From which accounts should my mom gift a large sum of money?

Post by biscuits »

VINNY wrote: Sat Jan 28, 2023 8:39 pm

I will list the following accounts that she owns

1. Vanguard Brokerage account: $409,933.42
- Total Bond Market Index $120,273.95 (down $-18,299)
-Total Stock Market Index $271, 399.99 (down $-23,000)

2. Revocable Living Trust Account: $75,847.11

-Total Bond Market Index $50,532.47 (down $-3,964)
-Total Stock Market Index $25, 314.64 (UP $+4,777)
I think respondents might be mis-reading Mom's asset list. I think the top line might be the total in each account, with the two lines below the breakdown of how the funds are invested (with a math or transcription error in #1).

So Mom's assets might really about $485,780, and the proposed gift is about 50% of her portfolio.
carminered2019
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Re: From which accounts should my mom gift a large sum of money?

Post by carminered2019 »

Gift them stock shares in taxable so she does not have to deal with taxes.
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Re: From which accounts should my mom gift a large sum of money?

Post by Morgan22 »

Since you mention that the living trust is no longer necessary then I would just draw that down to zero to simplify the portfolio and take the remainder from the brokerage account. It seems that the losses in the brokerage account would offset the remaining gain in the trust account. Just make sure to leave behind her preferred asset allocation in the brokerage when selling the shares.

(If you had listed in the OP that she has additional assets in IRA's that are not needed for expenses and will be untouched until RMD time you may have received more helpful responses. Maybe edit the OP to mention this?)
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Re: From which accounts should my mom gift a large sum of money?

Post by PotashDoggerd »

"I should've elaborated on my original post that the money my mom will be gifting us is being set aside in an account earmarked as "hers" so that it can be used specifically for her until her last day. We have a plan already in place so that my mom doesn't run out of money, if I could've anticipated all the well intentioned comments concerning her financial and mental well being, I would've mentioned the account where we are earmarking it as hers.

My mom has already made gifts to us in the past, and every single gift was taken and placed into this separate account earmarked for my mom, from all of us. We put this plan in place several years ago because none of us (my siblings and I) are comfortable taking these huge sums of cash from my mom while she is still alive. We are very well aware that as she ages, this money couldbe needed for her care. So it's being set aside.

We told my mom we created this account and tell her it's her money. I remind her of this because I believe until she passes, it's still her money not ours. If we were talking gifts of $500.00 or $1,000 there would be a lot less guilt or anxiety over this."


Based on this statement from the OP, then his mom/OP/the family is not contemplating that these transactions will be bona fide inter vivos (during life of the giver) "gifts." A legitimate "gift" requires that the giver relinquish all ownership, control, and also relinquish any beneficial interest in the gifted funds.

Shifting money between multiple various accounts and yet retaining the expectation that it will really still be Mom's money and preserved for her use, until she dies, means that legally--for estate planning, tax, Medicaid eligibility, or any other purpose--these transfers are not "gifts" at all, that these are potentially completely sham transactions, and may be regarded as evidence of fraudulent intent to conceal your Mom's total true assets from anyone or any governmental entity who might have reason to question it.
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Re: From which accounts should my mom gift a large sum of money?

Post by Luckywon »

VINNY wrote: Sun Jan 29, 2023 12:28 pm My mom is simply content with leaving it to her children, this was my dad's mentality and my moms as well. We can't change that. I would love nothing more than for my dad to be alive, so that he and my mom, could enjoy the fruits of their labor. They grew up during the great depression and only knew how to save.
Not to detract from their commendable values or any deprivation suffered, but the Great Depression was in 1930's, well before your Mom was born if she is 72.
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Re: From which accounts should my mom gift a large sum of money?

Post by White Coat Investor »

afan wrote: Sun Jan 29, 2023 5:25 pm
White Coat Investor wrote: Sun Jan 29, 2023 5:04 pm
afan wrote: Sun Jan 29, 2023 4:23 pm Two possibilities, both bad

1. Mom knows but has not told the OP about a fatal diagnosis. Mom will not live long enough to run out of money, even if she gives away the amount proposed. Even accounting for a few years of high healthcare expenses, she may have plenty. I would look closely at the figures, since long term care treatments not covered by health insurance can add up quickly. This is part of the reason so many of us are pushing back against the idea of accepting the money. She could be cognitively intact but in possession of facts not at your disposal. In this case, her decision could be rational. I still would not take the money but I could see how the plan might not be financially catastrophic.

2. Mom is experiencing cognitive decline and is unable to understand the implications of her decision. If so, it is up to the family to protect her from herself.
3. Mom is perfectly content living on the pension and SS and this money is just extra. She prefers to give with warm hands than cold.
That only works so long as her expenses stay low. At her age, she could face costly healthcare needs. If so, she will need that money.
I dunno, $800K + growth + a pension + SS + Medicare will pay for an awful lot of costly healthcare needs. It's okay to give some money away before you die instead of living in fear that you might need every last dime even though most people retire with less than you have even after giving it away.

There's another thread going right now where people are telling a decamillionaire he doesn't have enough. It's kind of ridiculous around here sometimes.
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renter
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Re: From which accounts should my mom gift a large sum of money?

Post by renter »

You have a very generous mom, but talk her out of it. Or maybe just advise she make modest annual gifts to grandkids for education and holiday gifting.
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Re: From which accounts should my mom gift a large sum of money?

Post by Minty »

VINNY wrote: Sat Jan 28, 2023 10:26 pm
GreendaleCC wrote: Sat Jan 28, 2023 10:19 pm If she is in good health, I agree with everyone who says she’s too young to lose half her savings.
She’s in great health and lives with my sister. This is her decision. She doesn’t want to pass with a large estate. And her children have the financial means to provide if a needs arises in the future.

Putting all that aside, I have a simple question. Is there one account/one fund which should be withdrawn from first. Thank you.
I, for one, think that 17 children and grandchildren who have demonstrated a willingness and ability to care for grandma offers much more lifetime retirement security than $200K. Under the circumstances as set out by the OP, I don't have a problem with the gift.

OP, take the funds from the source which will result in the lowest tax burden. If the figures you provided are the total losses since purchase, it does not matter, since both funds in the brokerage account seem to be under water. If the figures reflect only recent losses, we need to know the basis--probably the original purchase price.
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bmcgin
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Re: From which accounts should my mom gift a large sum of money?

Post by bmcgin »

Maybe she feeling like she'd rather give the money to family than lose it in the markets.

Suggest that she move the money into a Money Market Account and earn a guaranteed 4% to 5% return. And delay making the decision to gift it so early in life. Let her know she's too young to be thinking along these lines.
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Re: From which accounts should my mom gift a large sum of money?

Post by ncbill »

Minty wrote: Mon Jan 30, 2023 2:25 am
VINNY wrote: Sat Jan 28, 2023 10:26 pm
GreendaleCC wrote: Sat Jan 28, 2023 10:19 pm If she is in good health, I agree with everyone who says she’s too young to lose half her savings.
She’s in great health and lives with my sister. This is her decision. She doesn’t want to pass with a large estate. And her children have the financial means to provide if a needs arises in the future.

Putting all that aside, I have a simple question. Is there one account/one fund which should be withdrawn from first. Thank you.
I, for one, think that 17 children and grandchildren who have demonstrated a willingness and ability to care for grandma offers much more lifetime retirement security than $200K. Under the circumstances as set out by the OP, I don't have a problem with the gift.

OP, take the funds from the source which will result in the lowest tax burden. If the figures you provided are the total losses since purchase, it does not matter, since both funds in the brokerage account seem to be under water. If the figures reflect only recent losses, we need to know the basis--probably the original purchase price.
Yep, spouse's grandparents divvied up the family farm (deeded, separate lots) among their kids when they both were in their 60s.

Then continued to live there until their late 80s...grandpa died after a few weeks in a nursing home.

Then grandma moved in with her youngest child until she died more than a decade later.
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Re: From which accounts should my mom gift a large sum of money?

Post by celia »

VINNY wrote: Sun Jan 29, 2023 12:28 pm My intentions were to withdraw the money from the taxable accounts that have losses. The IRA will remain untouched as those distributions will affect her Medicare premiums. The other accounts will not since they have no gains.
Why should a tax-deferred account remain “untouched”? If you are trying to avoid RMDs later on, it is best to draw down the balance in it before getting to her RMD years, so the larger RMDs don’t push her into IRMAA territory. And instead of moving some of the assets to taxable, they should be moved to a Roth IRA instead where the growth can continue to grow tax-free. (This why stock funds should be converted first.) This is a no-brainer to me since she will pay the same taxes whether the IRA withdrawal goes to Taxable or to Roth.

It is also best to pay the taxes from her Taxable account or from her income streams.

And once RMDs kick in, the RMD needs to be taken out before the conversion is done each year.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Swimmer
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Re: From which accounts should my mom gift a large sum of money?

Post by Swimmer »

Does mom live in a state like Pennsylvania with a very high inheritance tax?

That could make her want to give as much away as possible while alive. Still a bad idea.
Carl53
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Re: From which accounts should my mom gift a large sum of money?

Post by Carl53 »

celia wrote: Mon Jan 30, 2023 3:06 pm
VINNY wrote: Sun Jan 29, 2023 12:28 pm My intentions were to withdraw the money from the taxable accounts that have losses. The IRA will remain untouched as those distributions will affect her Medicare premiums. The other accounts will not since they have no gains.
Why should a tax-deferred account remain “untouched”? If you are trying to avoid RMDs later on, it is best to draw down the balance in it before getting to her RMD years, so the larger RMDs don’t push her into IRMAA territory. And instead of moving some of the assets to taxable, they should be moved to a Roth IRA instead where the growth can continue to grow tax-free. (This why stock funds should be converted first.) This is a no-brainer to me since she will pay the same taxes whether the IRA withdrawal goes to Taxable or to Roth.

It is also best to pay the taxes from her Taxable account or from her income streams.

And once RMDs kick in, the RMD needs to be taken out before the conversion is done each year.
This is part of what I was trying to emphasize in my post upstream. With her modest income she can be converting some of her TIRA to Roth at very low tax rates each year. If she wants to have more benefit to those inheriting it, doing this will have the most bang for the buck.
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celia
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Re: From which accounts should my mom gift a large sum of money?

Post by celia »

Carl53 wrote: Tue Jan 31, 2023 6:27 am This is part of what I was trying to emphasize in my post upstream. With her modest income she can be converting some of her TIRA to Roth at very low tax rates each year. If she wants to have more benefit to those inheriting it, doing this will have the most bang for the buck.
This is particularly true if her tax bracket is less than those of most of her beneficiaries.

Just use her Taxable money to pay the taxes instead of gifting so much.

If she has over $500k in tax-deferred (which is not acknowledged in this thread), it would have been much better to focus on that account instead of her Taxable accounts. You will be leaving her “cash poor” in Taxable and stuck with higher than necessary taxes and possibly IRMAA surcharges that could have been avoided.
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Re: From which accounts should my mom gift a large sum of money?

Post by HMSVictory »

Though I am a few years away from retirement myself (7 to be exact) I have thought about how I want to gift our wealth in the future.

I will use a draw of 3% of the portfolio (not adjusted for inflation). 2% will be for travel and hobbies and 1% will be for giving. My AA is 90/10.

The 1% I give will be split between the charities we care deeply about and our 2 children. Gifts and donations will be made annually.

I think putting your giving on a budget and planning cycle makes sense (you can determine what % works for you).
Stay the course!
ttboy
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Re: From which accounts should my mom gift a large sum of money?

Post by ttboy »

One thought is whether or not she were to do this, there is not much doubt she will likely run out of $ at some point, either way…. Why not gift the $$ now and after 5 year lookback be in a position to have nursing home funded by medicaid?
biscuits
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Re: From which accounts should my mom gift a large sum of money?

Post by biscuits »

Uhhhh....because Mom might prefer the kind of private-pay nursing home/assisted living facility that her portfolio could fund (maybe with the proviso that once it ran out, they would accept Medicaid) and not the kind that accepts Medicaid from the start.
water2357
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Re: From which accounts should my mom gift a large sum of money?

Post by water2357 »

It can be difficult to get into a LTC facility without having assets available to private pay for 2 or 3 years and ensure that the facility will keep the person when the assets run out. And as mentioned above, otherwise the only option may be a low rated facility that will accept Medicaid from day one. Visit some LTC's that accept Medicaid from day one and decide if that is a place she would want to provide her care and find out if they have openings. If she has no assets left when she needs care, that may be her only option.
Nutmeg
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Re: From which accounts should my mom gift a large sum of money?

Post by Nutmeg »

The OP should carefully consider the comments about long-term care made above. Also, the OP’s mother might also prefer a single room in a skilled nursing facility rather than the shared room that Medicaid would provide (with the corresponding loss of privacy, reduced room for visitors, or possibility of a loud, intrusive, or abusive roommate, about all of which I am personally familiar). As a matter of policy, some facilities won’t allow family members to pay the differential to allow the Medicaid recipient to have a private room.

I agree with prior comments about a possible sham transaction. If the money the mother is “gifting” is going into a separate account that is being saved for her future needs, and therefore doesn’t benefit her descendants at all, what is the purpose of doing this?
PotashDoggerd
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Re: From which accounts should my mom gift a large sum of money?

Post by PotashDoggerd »

deleted dup post
Last edited by PotashDoggerd on Sat Feb 04, 2023 11:32 am, edited 1 time in total.
PotashDoggerd
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Re: From which accounts should my mom gift a large sum of money?

Post by PotashDoggerd »

OP has made it very clear after his original post that these prospective financial transactions from his mother to various relatives will not be, and are not intended to be, true gifts, and will not be made by Mom with true donative intent.

Instead, it sounds like this is a complex scheme for Mom to spend down her assets in a manner in which in reality, the relatives are simply holding her funds, but in accounts titled in their names, as a form of equitable beneficial trust. Then, in the future, when the funds need to be spent for the benefit of Mom, everyone in the family will do so, and preserve Mom's funds until such time as she needs them.

OP rejected my prior advice that his Mom needs a qualified, neutral, experienced, well-vetted fee-only financial planner to consult with concerning her overall financial picture, what she actually wants to do or not do with her money, and then develop a written plan to be executed by Mom perhaps with the assistance of relatives such as OP, but perhaps not, if the financial planner concludes that the relatives are not acting in Mom's best interests.

Mom may also be one of those folks who actually WOULD benefit from having an on-going relationship with a professional financial planner and asset manager, even if that costs 1 or 2% annual AUM.

Mom's plan could and should include annual giving to her relatives, if that is actually what she truly wants to do with her money, and I'm sure it won't be 20-25% of her entire net worth in one go.

A better plan would be to make annual gifts to whoever she wants to give the money to, again with assistance from her financial planner, depending on an annual review of her portfolio status and her life situation. Always keeping any individual gift in one year to a single person, under the annual non-reportable gifting limit. There may be some years when her portfolio has done really well, that it would be safe for her to donate a little more than otherwise; other years, when the amount should be less or in a severe market crisis, nothing at all that year.

That's assuming she actually wants to give any of her money away at all. Right now, she doesn't. Right now, she has been advised by OP and evidently all the other family members that the money will actually still belong to her, they are all just "holding" it for her.

Which raises the question: Why?

Only two motivations seem apparent--some kind of fraudulent scheme to pay-down assets for a purpose relating to establishing or retaining Medicaid eligibility; or, one or more of the relatives (maybe all of them) and playing a trick on Mom, and have no intention of giving her her own money back when she asks for it back.

Either motivation is improper and this thread should be locked.
Swimmer
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Re: From which accounts should my mom gift a large sum of money?

Post by Swimmer »

If mom is aware that her “gifts” are being kept in accounts earmarked “hers,” then they are not really gifts. How could she possibly have warm feelings about that? A gift is given without conditions.
Rocky Mtn Man
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Re: From which accounts should my mom gift a large sum of money?

Post by Rocky Mtn Man »

Swimmer wrote: Sun Feb 05, 2023 9:14 am If mom is aware that her “gifts” are being kept in accounts earmarked “hers,” then they are not really gifts. How could she possibly have warm feelings about that? A gift is given without conditions.
The IRS also agrees with this.
Jimsad
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Re: From which accounts should my mom gift a large sum of money?

Post by Jimsad »

Freeadvice wrote: Sat Jan 28, 2023 10:06 pm None. Only 221,000 is a quarter of her portfolio. She may need it in the next 30 years.
Agree
Minty
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Re: From which accounts should my mom gift a large sum of money?

Post by Minty »

Rocky Mtn Man wrote: Sun Feb 05, 2023 11:26 am
Swimmer wrote: Sun Feb 05, 2023 9:14 am If mom is aware that her “gifts” are being kept in accounts earmarked “hers,” then they are not really gifts. How could she possibly have warm feelings about that? A gift is given without conditions.
The IRS also agrees with this.
In my view, this is not quite right. If I offer my child a $20K vacation with their parents, it is a gift for family purposes and for gift tax purposes, even if I don't offer the option of a cash alternative, and even if I pay the costs myself. More generally, I've seen not the least hint in this thread that OP intends to chisel either the Medicaid system or his mother, although I do think the situation is complex enough that the OP might want to consult a lawyer to structure this for Medicaid purposes.
Core Four w/ nominal bonds & TIPS. Refi Rampage: Purchase: 3.875% 30 -> R1 3% 20 -> R2 2.375% 15 -> R3 1.99% 15 -> R4 1.875% 15
Rocky Mtn Man
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Re: From which accounts should my mom gift a large sum of money?

Post by Rocky Mtn Man »

Minty wrote: Sun Feb 05, 2023 8:05 pm
Rocky Mtn Man wrote: Sun Feb 05, 2023 11:26 am
Swimmer wrote: Sun Feb 05, 2023 9:14 am If mom is aware that her “gifts” are being kept in accounts earmarked “hers,” then they are not really gifts. How could she possibly have warm feelings about that? A gift is given without conditions.
The IRS also agrees with this.
In my view, this is not quite right. If I offer my child a $20K vacation with their parents, it is a gift for family purposes and for gift tax purposes, even if I don't offer the option of a cash alternative, and even if I pay the costs myself. More generally, I've seen not the least hint in this thread that OP intends to chisel either the Medicaid system or his mother, although I do think the situation is complex enough that the OP might want to consult a lawyer to structure this for Medicaid purposes.
You are correct, it's a gift even if not given in cash. If you made your child mow the lawn for an entire summer, and help repaint the garage, and then paid them a $20k vacation, that is not a gift.
Luckywon
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Re: From which accounts should my mom gift a large sum of money?

Post by Luckywon »

Rocky Mtn Man wrote: Mon Feb 06, 2023 11:55 am
Minty wrote: Sun Feb 05, 2023 8:05 pm
Rocky Mtn Man wrote: Sun Feb 05, 2023 11:26 am
Swimmer wrote: Sun Feb 05, 2023 9:14 am If mom is aware that her “gifts” are being kept in accounts earmarked “hers,” then they are not really gifts. How could she possibly have warm feelings about that? A gift is given without conditions.
The IRS also agrees with this.
In my view, this is not quite right. If I offer my child a $20K vacation with their parents, it is a gift for family purposes and for gift tax purposes, even if I don't offer the option of a cash alternative, and even if I pay the costs myself. More generally, I've seen not the least hint in this thread that OP intends to chisel either the Medicaid system or his mother, although I do think the situation is complex enough that the OP might want to consult a lawyer to structure this for Medicaid purposes.
You are correct, it's a gift even if not given in cash. If you made your child mow the lawn for an entire summer, and help repaint the garage, and then paid them a $20k vacation, that is not a gift.
Isn't this venturing a little bit out of the real world? For example, in your above case if it's not a gift then should the child report it as income?

If I treat others to something like a vacation where I am a participant a gift tax return does not cross my mind.
Rocky Mtn Man
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Re: From which accounts should my mom gift a large sum of money?

Post by Rocky Mtn Man »

Luckywon wrote: Mon Feb 06, 2023 12:26 pm
Rocky Mtn Man wrote: Mon Feb 06, 2023 11:55 am
Minty wrote: Sun Feb 05, 2023 8:05 pm
Rocky Mtn Man wrote: Sun Feb 05, 2023 11:26 am
Swimmer wrote: Sun Feb 05, 2023 9:14 am If mom is aware that her “gifts” are being kept in accounts earmarked “hers,” then they are not really gifts. How could she possibly have warm feelings about that? A gift is given without conditions.
The IRS also agrees with this.
In my view, this is not quite right. If I offer my child a $20K vacation with their parents, it is a gift for family purposes and for gift tax purposes, even if I don't offer the option of a cash alternative, and even if I pay the costs myself. More generally, I've seen not the least hint in this thread that OP intends to chisel either the Medicaid system or his mother, although I do think the situation is complex enough that the OP might want to consult a lawyer to structure this for Medicaid purposes.
You are correct, it's a gift even if not given in cash. If you made your child mow the lawn for an entire summer, and help repaint the garage, and then paid them a $20k vacation, that is not a gift.
Isn't this venturing a little bit out of the real world? For example, in your above case if it's not a gift then should the child report it as income?

If I treat others to something like a vacation where I am a participant a gift tax return does not cross my mind.
Correct, it would be reported as income. The "gift" of a Cadillac made it to the Supreme Court. Commissioner v. Duberstein, 363 U.S. 278 (1960)
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