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Author: DowDanny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121592  
Subject: Re: Gifting and Estates Date: 9/18/1998 10:29 AM
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>> My mother-in-law wants to "give" money to my wife and her brother to remove capital from her estate in anticipation of nursery home sell-off requirements or death in the future. <<

"Reducing one's estate" is legitimate, but you may have some problems if you are "disposing of assets in advance of applying for medical aid" - more later.

>> Some questions if I may...

1. Can she AND my father in law gove $10,000/year to wife and brother? <<


No problem - $20,000(10,000 from ma, 10,000 from pa) to each wife and brother. Any more than that and you run into 'tax implications'.

>> 2. Is this $10K free from income taxes for the "children"? <<

Absolutely.

>> . If in the future, she has monetary needs, and they give her some money (back), what is the effect? <<

This one is more complicated, I think - I leave general answer to TMFTaxes.
One thing to worry about is that Medicaid (and many nursing homes) look very hard on distributed assets that were given away just before entering their system. In some cases, they go back and include 'disposed' assets from up to several years earlier when determining income, assets and aid level. This can make it difficult and confusing if you are in process of selling a house or business of relative at same time elderly relative is reaching age where they need professional care. You better check carefully on the rules for the programs/places you intend to use.

But I do KNOW that you (or your wife, etc...) can make UNLIMITED contributions to the medical expenses of your parents. That means any nursing, medicines, etc... so long term care may also qualify, depending on where they are. The only hitch here is that the payment must go DIRECTLY to the provider, not to your parents to pass on to the doctors/hospitals.

Conversely, when your parents are in the 'distribution phase' they can make UNLIMITED contributions to your childrens' educational expenses {can you say "pay tuition at Harvard} as long as they do this directly to the provider. No tax consequence for either form of 'support'.

>> 4. Can they also gift teh childrens' spouses? What limits? <<

Individuals can give $10000 (tax-free to both provider and receiver) to ANY BODY (and everybody) they elect.
that is how Mrs. R. Kroc gave away millions to the flood victims of her home town. There is no limit on who may receive the gift, nor on how many people can be gifted. The only limit is "$10,000 per individual gift from each individual". Thus - your ma-and-pa could together give you-and-your-wife a total of $40,000 tax free per year.

If it gets any more complicated than that you're best off discusscing with a profressional, and not with some guy on the internet.

Good Luck !

-DD
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