[davedel]

My father passed away very unexpectedly and without warning 2 months ago. Now that the shock has finally subsided I'm feeling overwhelmed and I'm afraid that I'll make a mistake that will cause future problems.

My father was retired and had various bank accounts and mutual funds which constituted his life savings. My father had put my name along with my mothers name on all the accounts many years ago so there is no problem accessing them. The total value of all the accounts combined is approx. $200K and throughout the years the correct tax was always paid.

The principal in these accounts needs to stay steady as my mother (retired) uses the interest to survive and pay house expenses ( house co-owned with my father) and with low interest rates it barely covers her bills. My mother always let my father handle all financial matters for her and is now looking to me to take his place. I moved back into her house as she simply can't maintain it on her own.

I've already removed my fathers name from the accounts leaving just me and my mother. My concern is that she wants to remove her name totally from all the accounts leaving me as the sole owner. She suggested this because many years ago her mother (my grandmother) went on title 19 and lost most of her life savings.

My concern is that even though this money was already in my name I was never the primary account holder, plus it was always jointly owned along with my father and mother (my father paid the taxes on his return).

If my mothers name is dropped and the funds are exclusively in my name will this be subject to some form of gift tax? Will the government suddenly want to know why I have 200K in my name (I only make about 20K per year)? I'm really afraid of making some blunder simply because if I get hit with a whopping tax bill unexpectedly I won't have the necessary funds to continue to take care of my mother.

Please, if anyone has any advice or suggestions I would greatly appreciate anything you can offer to help.

Thank you so much.

[AtlantaTaxExpert]

If your mother transfers the funds to your name exclusively, a gift tax return will have to be filed.

However, she will be able to access the Unified Credit for her estate, thus making the payment of any gift taxes unnecessary.

You need to get professional tax advice on this matter, but it is not too complicated. Any competent CPA who specializes in tax work or an enrolled agent can walk you through the process and file the necessary gift tax return.

[davedel]

THANKS Atlanta tax expert!! After your advice I read up a little on the unified credit as I had never heard of it before. Every reference on gift tax I read previously said that the amount was taxable after 10K, none mentioned the 600K credit.

One final question if I can trouble you. Does the gift tax return need to be filed within a certain time frame of receiving the money or can I do it with an accountant along with my regular tax return in march?

You've been a fantastic help, thank you very much!!

[AtlantaTaxExpert]

The gift tax return is an ANNUAL return, just like the income tax return.

Your accountant should be able to handle it with your annual tax return.