Hello - I’m a complete newbie but have inherited some money and am trying to research and get advice so I make the best decisions for myself and my future family.
My sibling and I have received an inheritance after both parents passed away. Everything was split equally except for a brokerage account, which ended up falling to her because my father had her down as co-owner and it was a joint tenant account. She is willing to gift me half of the account. We got advice from a tax attorney that she would just claim the lifetime gift exclusion and then file a gift tax return, but there would be no other negative consequences. The brokerage will not give us advice, but an accountant has said basically the same thing. We’re both feeling a bit nervous about it, so we’re hoping someone here can chime in with advice or opinions. Anything else we need to be aware of? Is there any other way to handle splitting the account? Thank you so much in advance.
How much money are you expecting? There’s an amount a person can give to another person before the gift tax return is required. I don’t follow the amounts too closely because I’ve never given or received enough to matter. But it’s somewhere around $20k. If you’re getting less than that, there’s no issue, and nothing to do. If you’re getting less than twice that amount, then your sibling could give you half now and half on January 2 to avoid gift tax. If it’s more like $100k or $500k, then there would not be an easy way for your sibling to avoid filing a gift tax return. Then some of that gift would count toward the amount your sibling can pass tax-free via inheritance.
Thanks for your reply. So we know she has to file a gift tax return. The amount to be split is north of $1 million. We’re also aware there’s a cost to file the return, which we’ll split. Is splitting the account this way a big deal outside of the cost of the return? Obviously she’d be using up her lifetime maximum, but we don’t anticipate her gifting me any additional money. We’re just trying to make sure there’s no other alternative ways to handle the situation and also that there’s no downsides to her gifting it. We know the situation isn’t ideal…
Her lifetime exclusion applies to all recipients, not just you. Will her estate be more than $10 million when she passes? (Again, as a rough estimate, because I haven’t looked up the exact numbers for the lifetime exclusion, and they will most likely change during her lifetime anyway.) If so, the current gift will likely raise the taxes her estate pays before her heirs receive their shares.
As for splitting the account, you should be able to easily set up an account with the same brokerage (or even a different one if you want as long as it accepts the particular funds or stocks), and she could transfer holdings to you without selling them. Then you can sell them. If the assets have gone up since your parents passed, that will save her the expense of paying income taxes on the gains (you would pay that instead), and might also decrease the amount of the gift tax. Or she could sell assets, pay any taxes due, and transfer the cash to you (e.g., by a cashier’s check or electronic transfer).
With that kind of money, I’d caution against relying too much on what randos like me on the internet might say. I’m glad you talked to an attorney and accountant already. If you’re still not comfortable, gather your questions and go back to one of them again.
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