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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8206  
Subject: Re: Where to put 529 Plan Date: 9/25/2003 10:03 PM
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Littlechap writes (in part):

You seem to say that the aunt might incur taxes by giving the gift. Is that what you meant?

I reply:

Yes. Gifts in excess of $11,000 per year (that's the current limit, it indexes) trigger the unified gift/estate tax. It will not likely lead to any immediate tax liability (unless you have already used up your entire lifetime credit), but it can adversely affect estate planning. A way to avoid this issue is to pay the money directly to the school.

The general rule on gift taxes is that the recipient NEVER owes them. If you give your son $2,000,000, he won't owe a penny on the gift. You, on the other hand, will probably owe Uncle Sam a lot of money. Parent-to-child gifts are NOT exempt from gift tax issues. The only category of gift that usually is exempt is interspousal transfer. Even there, I think there are issues if one spouse is a U.S. citizen but the other is not. --Bob
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