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Financial Planning / Tax Strategies
|Subject: Re: Want to give sister retirement and/or down p||Date: 6/6/2004 6:11 PM|
|Author: sprexumn||Number: 72134 of 121219|
Thanks everyone for the suggestions on the issue I raised at the top of this thread. I did some research and spoke with my sister. Here's the plan that I'm about to implement:
- I'll open a INGDirect Savings account for her, as a joint account with both me and my sister on it. She'll be the primary account holder, so that the money is in her name before the wedding. With the ING accounts the only way to get money in or out is to link to an outside checking account. We will link to my checking account only, which should prevent her from being tempted to withdraw money. There are probably legal ways that she could access the money with a lot of effort without going through me, but I think the barriers are high enough. I will fund the account with $17,000 and we have the understanding that money is to be withdrawn only for a house deposit or to fund her IRA.
- She'll open a Vanguard Roth IRA, and every year I'll write a check (from the ING account funds) to the IRA to fund it for her. This first year I'll write the check directly without going through the ING account, payable to Vanguard.
For tax purposes I'll consider the $3000 Roth contribution and $8000 of my contribution to the joint account a gift to her this year. And next year I'll consider the remaining $9000 of the joint account money to be a gift to her. Does anyone know if I need to write some sort of document declaring this to be so, and/or just keep records in case I'm audited?
Another question I have is how to actually make the home deposit happen when it's time. I assume that since she's the Primary account holder and the money will have been there for more than a year, that mortgage companies will consider the money "hers" and not a "gift from her brother" at that time. The wrinkle is that because of her bad credit history, the mortgage would likely be in her husband's name only without her signing. I assume that it's still kosher (from lender perspective) for her husband to get the downpayment from this account in his wife's name even if she's not one of the signers for the mortgage. At any rate, that stuff can be worked out later.
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