I'm inheriting about $300k from my grandmother. I have 2 siblings whom she specifically left out of her will. I don't believe this was fair and have decided to split the inheritance 3 ways between us. So all said and done I will get $300k and plan to gift $100k to sibling A and $100k to Sibling B.
I do not want this to count against my lifetime gift exemption nor do I want to report this, so I plan to do this in segments. I am married, as are my 2 siblings. My plan is this:
- I write check for $19k to Sibling A
- My wife writes check for $19k to Sibling A
- I write check for $19k to Sibling A's spouse
- My wife writes check for $19k to Sibling A's spouse
On each check I plan to make it clear who the giver and receiver is by writing in the memo line "Gift from [my name] to Sibling A", etc. I will do the exact same thing for Sibling B. This gets me to $76k gifted to each of them. On January 1st next year I do the same procedure up to the remaining $24k.
Is this a sound plan? Does anyone see any issues or other considerations that I need to be aware of? Thank you in advance for any input.
Gifting portion of inheritance to siblings
byu/Hockey_is_Life intax
Posted by Hockey_is_Life
4 Comments
Solid plan, now the remaining 100k is probably a marital asset but it does not seem like that is an issue for you. Very kind of you.
You are handling this perfectly.
Yeah, that works, as long as neither you nor your wife make any other gifts to your siblings this year.
If you’re in a state with inheritance tax, that’ll apply to the full $300k, and personally I would pro-rate that across the amounts that wind up with each of the three of you.
You *could* calculate and pay interest to your sibs on the $24k that is delayed, but I personally wouldn’t bother.
The only thing I’m worried about for you, is, in what form is that $300k. If it is in stocks. you’ll need to pay taxes on them. (while true the taxes will be lower as the cost basis resets on the date of inheritance (usually the date of death), you could still owe capital gains on the sold amount.
If it’s in an IRA or 401k, there is no step up. You selling them at whatever their original cost basis is. And it’s taxed as Ordinary Income.
if it’s Cash, it’s not federally taxable, but certain states do tax it.
Also, if it’s being sent to a bank (which it probably should be, 300k is a lot to keep in the mattresses) you’ll owe taxes on the interest. Which if you put it into a High Yield savings account would end up being about $10.5k-11.25k. Which isn’t nothing. So timing needs to be thought about.