[jobassett]

What size of a cash gift can an elderly parent leave her adult children without it affecting her tax situation or the adult child's?

Is there a limit to the number of these gifts that can be given to the same adult child?

Thanks
Jo

[ma0641]

I believe it is $10,000 annually, per person, without any tax penalty. Can be cash, check etc. Be careful putting $10,000 cash in the bank, I think the bank has to report that to the feds because it is cash. Check is better.
This is a smart way to possibly reduce estate tax at death.

[ebaines]

The amount is actually $13.5K annually, from any one person to any one individual. If you are married, or if the individual is married, you can take advantage of that by making the gift from you and your spouse to the child and his/her spouse. Play the game right and you can make gifts from one couple to another of up to $54K without tax consequence.

If you make a gift of more than $13.5K in a year, you must fie a gift tax form with the IRS. You won't actually owe tax, unless the sum of all gift tax forms filed over the years adds up to more than $1 million. However, even if you don't owe gift tax it can affect your estate planning options. If you are considering making a gift or gifts more than the $13.5K annual exemption, and especially of your net worth is more than $1 million, I strongly suggest you consult with a qualified estate planning expert to walk you through the implications.

[MukatA]

Only for 2010, the estate tax exemption amount is unlimited. For the inherited property, the basis will not be "step-up basis;" it will be same as the original basis.
Gifts over $13,000 will be taxed at the income tax rate.

[ebaines]

I must correct my earlier post - the annual exclusion is $13K, not $13.5K. And the lifetime exclusion amount is $345,800, not $1 million.

Gifts above $13K are NOT taxed until your lifetime exclusion of $345,800 is used up. The gift tax rate is not the same as your income tax rates - the rate ranges from 18% to 45%. As stated earlier, if the OP is in a position to be making gifts of this magnitude then she should certainly consult an estate planner to avoid potential costly errors for herself and/or her heirs.

[wnhough]

QUOTE," What size of a cash gift can an elderly parent leave her adult children without it affecting her tax situation or the adult child's?"---In the case of 2008, the amount was $1,000,000 unless the elderly parent made other gifts exceeding $11,000 ( for 2008) to other recipients. What I'm saying is that assume that the elderly parent give $1,000,000 to his adult child for the first time in 2008; then the gift tax amount the elderly parent needs to pay is; $345,800;$250,000*0.39(39%)+$248,300, but generously, the government provides the donor with the unified credit amount of $345,800, so the donor, the eldery parent, doesn't need to pay any gift tax.
" . . . or the adult child's?"-- Whether the child, the recipient, will pay gift tax or not will fundamentally depend on the child's choices; what I mean b that suppose the child were to give frequent gifts to others, then he 'd be in a situation where he needs to pay his gift taxes on gifts exceeding $13,000 in the case of 2010. In particular, he 'd make bigger amount of gift, over $1,000,000 for 2008, then he 'd be subjct to his gift tax liability on the accumulated gifts that he had made~~

[wnhough]

Take a note on this paragraph CORRECTED; In the case of 2008, the amount was $2,000,000 unless the eldery parent made other gifts exceeding $11,000 ( for 2008) to other recipients. What I'm saying is that assume that the elderly parent give $2,000,000 to his adult child for the first time in 2008; then the gift tax amount the elderly parent needs to pay is; $780,800;$500,000*0.45(45%)+$555,800, but generously, the government provides the donor with the unified credit amount of $780,800, so the donor, the eldery parent, doesn't need to pay any gift tax.