[macksmom]

My husband's grandfather passed away and his grandmother moved in with my in-laws. They are in the process of transferring all the money and assets out of grandfather's name and into my father-in-laws name. Grandma wants to sell her house and split the selling cost between my husband and I, and his sister so we can buy houses. So we will have roughly $125K coming to us.
My father-in-law said he wants to just buy our house in his name because he doesn't want to get hit on taxes for "gifting" us more than $13K in one year. I am thankful for the gift, but also don't want my home in someone else's name. I did some research and what I found is that if you "gift" under $13K to one person in one year you do not have to file a gift tax. If you "gift" more, you have to file, but you don't have to actually pay until you have reached your lifetime gift max of $1million dollars in a lifetime.
My father-in-law has never gifted cash, so is this true? Could he "gift" us the $125K for our house and just have to file the gift tax and not actually pay taxes on it?
We are in Ohio.

Thanks!

[AtlantaTaxExpert]

Michelle:

Your analysis is correct, though your math is off a bit.

Your father-in-law can gift $13K to you, then $13K to your husband.

Then your mother-in-law can gift $13K to you, then $13K to your husband.

So at least $42,000 can be transferred to your and your husband with NO tax consequences at all.

If you have children, the same process can be done to each one of them. If not, the gift can still be transferred and a gift tax return must be filed. However, using the Unified Credit, no tax will be due.

There are other strategies that can be used to transfer title of the home to you and your husband in phases over several years that would require NO gift tax return at all.

A visit to an estate planner or a tax professional with estate tax expertise can have this and other strategies explained to your father-in-law in detail.

If a gift tax return is needed, it is not an exceptionally hard return to file for a tax professional, but amateurs should not attempt to file it.

[macksmom]

Thank you so much for replying... it was VERY helpful. I think my father-in-law is just going off his common knowledge that if you gift more than $13K he will be taxed... I know he doesn't know about not actually having to pay the tax... that he just has to file.

It was VERY useful to know that BOTH my inlaws can gift and it be considered separate gifts... because in my short research, I didn't know that.

We have one child, she is 8yrs old. If they both gift to her (to help avoid the taxes) would that money have to be "held" for my daughter or would we, as her parents, be able to use that towards our future house?

Unfortunately my inlaws are not very good with money or the innerworkings of estates and assets... and this has been passed along to my husband. I handle all the finances in the household and I know that my father-in-law will assume he is correct just to do as little work as possible. So I want to get as much information as I can so I can make sure the best thing for everyone is done.

Also, I figured that there might be someway (if we allowed him to purchase our house in his name) that we would be able to somehow transfer the deed, but we are looking at home a bit more than 125K... so I would rather just be able to handle it all ourselves... paperworks, payments, etc.

Oh, one more question... when you say they can each gift us $13K in one year... is that actual time year, for example if they gift us tomorrow, would they not be able to gift us again until July of next year... or would they be able to gift us again the 1st of the year?

Thanks again, so much!

[AtlantaTaxExpert]

You WILL be able to use it toward the house, since she lives in the house as well.

The gifting can be done anytime during the calendar year. With your daughter participating, the gifting amount will go UP to $78K per year, so, time it to give the first round of gifts at Christmas, wait a week, then give the second round right after the New Year, for a total of $156K.

Email me at [email protected] if you have questions, or if you want to email me a phone number so we can discuss telephonically.

[macksmom]

Fantastic!

So this applies to Ohio law correct?

And do I have it figured correctly that father-in-law can gift each of us (3), $13K... totaling $39K. Then mother-in-law can do the same, at the same time, to equal a total gift amount for the year of $78K?

Then after the first of the year they can do the same thing, or roughly less... all without having to file the gift tax?

I will keep your email and get in touch with you via email so I can print off the facts to present to my father-in-law :)

Thanks again!

[AtlantaTaxExpert]

Yes, you have it correct. This gives you plenty of time to plan the gift transfers during the Christmas-New Year holidays.

The gift tax is a FEDERAL tax, so it applies ANYWHERE in the United States.

I do NOT think Ohio has any type of gift or transfer tax, but a call to the Ohio Department of Taxation should get you an answer to that question.