Other Tax Questions
Questions and comments on other topics covered in Fairmark.com, such as UTMA accounts, and any tax questions that don't fit our other categories.
Gift tax vs Payable -on-death proceeds
Posted by: sandy20020, April 27, 2017 02:12PM
We will $56,000 money to a son & his wife. Our other son is not married. We think we will give him $ 28,000 money. If I set up a saving account,(in my name only) on Payable-on Death. When the beneficiary receives the balance (any amount) is it subject to Gift Tax?

Re: Gift tax vs Payable -on-death proceeds
Posted by: Sven, April 27, 2017 02:42PM
This is sort of a tempest in a teapot. Virtually nobody who makes gifts ever pays gift tax. The reason is everyone has a lifetime taxable gift exclusion of something like $5,400,000 at the moment. The glitch is do you have to file a gift tax return information on Form 709 with the IRS for some gifts, principally any single gift over $14,000 per person. You and your wife could each give your single son $14,000 per year from now until kingdom come and never have to file any paperwork, if each of you made separate gifts to your son using individually owned money. Joint spousal gifts are a little tricker and may be even more than that in community property states.

You might want to read posts and responses here about spousal "split" gifts using jointly owned funds and how the paperwork has to be done. You are on the right track about the $28,000 except be aware if the money is from your joint account with your son if anything has to be reported after your are dead is a $14,000 lifetime taxable gift. And again, that' maybe a paperwork problem for your estate/personal representative to figure out. You won't care.

And to state the obvious, gifts received are not taxable to the recipient, regardless of the amount. They are not income at the moment.

Re: Gift tax vs Payable -on-death proceeds
Posted by: Drewremedy, April 27, 2017 03:50PM
Some states like mine, PA, would tax such a gift not completed more than 1 year before you pass. Not a big bite..but still nasty news.


Re: Gift tax vs Payable -on-death proceeds
Posted by: SC, April 27, 2017 04:40PM
If your children are designated as the POD beneficiaries on your accounts then they haven't received anything until you die. Up until that date, you can cancel the account, spend it, or give it to anyone else that you want.

If they receive it because you died it's not a gift, it's a nontaxable inheritance.

Re: Gift tax vs Payable -on-death proceeds
Posted by: Drewremedy, April 27, 2017 06:01PM
WEll so be it at Federal level....but not in my state.

And in my state, the state taxes can easily be more than Federal ones IF one gives to non family me,bees.

I'm not a fan of POD ..be sure your spouse can get funds out if you are incapicated

Re: Gift tax vs Payable -on-death proceeds
Posted by: Drewremedy, April 27, 2017 09:57PM
as an aside, most bank accounts pay lousy interest rates...you might seek more productive buckets to hold decent size intended transfers.



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