Grandparents paying part of granddaughters house

[davis_mc]

I have a question that may need clarification. 

My parents paid a large portion for my nieces (their granddaughter's) house. It was significantly about the $15000 year limit per parent for gift taxes.

It's my understanding that they need not file the 709 gift tax and this gift would come out of their other son's and granddaughters inheritance. So it is essentially deducted from the inheritance instead of paying any gift taxes.  That is also how I understood it from people I know who live in CA and have done that with their kids/grandkids. 

Am I correct in that it will come out of their inheritance?

Please let me know. 

[xmasbaby0]

We are able to answer tax questions here.  We can say that your niece does not have to enter the gift on her tax return because gifts received are not taxable.  The person who gave the gift does not pay tax on the gift if it is below the lifetime amount of more than $11 million.   If the gift was under $15K per grandparent in the tax year to any one individual then they do not have to complete a form 709 gift form.

As for your concerns about the inheritance----that is not a tax question.   That is a legal question and also gets into the area of the discretion the grandparents have to do whatever they choose to do with their money.   They can assign amounts as they choose to when they complete their last will and testaments.

Money that you receive as a gift is not taxable income to you, and you do not need to report it on your income tax return.  Money that you gave as a gift to someone else is not deductible for your taxes.

Turbo Tax does not support the gift tax form 709, but here is a link:

https://www.irs.gov/pub/irs-pdf/f709.pdf

https://turbotax.intuit.com/tax-tips/estates/the-gift-tax-made-simple/L5tGWVC8N

https://www.forbes.com/sites/ashleaebeling/2017/10/19/irs-announces-2018-estate-and-gift-tax-limits-...

[davis_mc]

Thanks for that bit information. Sort of falls in-line with my assumption, I believe. When I spoke of inheritance I was speaking in the form of inheritance tax or more so the lifetime $11+ million it seems. 

I am a little confused on your statement though. "The person who gave the gift does not pay tax on the gift if it is below the lifetime amount of more than $11 million.   If the gift was under $15K per grandparent in the tax year to any one individual then they do not have to complete a form 709 gift form."

If the gift from my parents was like $100,000 per parent to $200,000 in total.  It's under the $11+ million but *it's not* under the $15K per grandparent.  Do they need to fill out the form 709 then?

[xmasbaby0]

Yes they do.   If they gave a gift of that much in one year they do need to complete a form 709.   TurboTax does not support the 709--- it is not part of a tax return.   It is filed on its own and must be mailed to the IRS.

[davis_mc]

That's where it's a little confusing. It's still under the $11+ million lifetime max.  The confusing part is that it's under the lifetime max why then is the $15K per parent applicable? 

I don't think they $100,000 each totaling $200,000 but I think they did over the $15,000 per parent this year - how much I do not know. 

Yet. I still don't get it because it's still under the $11+ million lifetime max.

Can you clarify or explain on that. please? Because that is basically saying that an $11+ million will never be met with $30/yr per couple (parents) during a lifetime. 

[xmasbaby0 · Accepted solution]

Assuming there are two grandparents----they can each give up to $15K to their grandchild (or whoever) in one year without the need to fill out a form 709.    If the grandchild is married, they could even give another $15K each to the grandchild's spouse without having to fill out a form 709.   But if their gift exceeds that $15K per person, then the form 709 must be completed.   They do not PAY gift tax unless someday they exceed a lifetime amount of over $11 million in gifts given.   

If they gave the grand child over $30K they must complete a Form 709 even though no tax has to be paid with the form.   And you have mentioned $100K more than once.   That means they do have to fill out that gift form.   They might need to seek paid tax help to complete the form---if they can afford to give a gift of $100K they can also afford competent tax help.

[davis_mc]

Now, I get the full picture and better understanding. There is a strong likelihood that the they will not be gifting ever enough to reach the lifetime max during their lifetime.

But agree, yes, they would be able to afford that. 

Again, thanks much and very much appreciated. 

[xmasbaby0]

Read through those links I gave to you earlier---they explain it in more detail so that you will understand.  Stay safe!