Reporting Gifts to Family

[chriscross]

In 2024, my husband and I gave $90,000 in cash as a gift to my daughter so she could buy out her husband from ownership in their family home as part of a divorce settlement. The maximum allowable individual amount (if my husband and I both gift the maximum) is $36,000. This leaves a balance of $54,000 which would need to be reported on Form 709. My question is, can we split this $90,000 gift and apportion $36,000 to our daughter, and $27,000 to each of her two children (who are minors living in the home). Looking for a creative way to avoid filing the Form 709- we are not wealthy and there is no way we will ever reach the 14million gift and estate limit. This filing rule is clearly meant for the ultra wealthy!

My understanding is that gifts to minors may be used for their benefit- and it seems providing them with a home meets that criterion. Thanks.

[taxlady28]

You did not make those individual gifts and need to complete form 704 with the correct amount gifted to your daughter.  It is a little bit of extra work but not that difficult. TurboTax does not support the form.  Download it from the IRS, complete the form, sign it and mail two copies to the IRS.  If you have any questions when completing the form, post them here and someone will help.

[chriscross]

Okay, I understand I'll have to file the form at this point. But I'm still wondering whether we could have chosen to give the money as suggested, $36,000 to our daughter, and $27,000 to each of her minor children. Then, as legal guardian, she could use the money for their benefit to buy out equity in the home.

[DavidD66 · Accepted solution]

The odds of your gift(s) ever being questioned by the IRS are negligible.  If you want to make to make sure there zero chance of it ever becoming an issue, file Form 709.  That said, if you were to write letters to your grandchildren and their mother telling them that you have gifted them the money by way of their mother (your daughter) you should be OK.   

Yes you could have made gifts to the children and then her mother, as their guardian could have used it for their benefit as she chooses best.  

Here is a link to IRS Form 709

[taxlady28]

The way to do that would have been to cut individual checks for each person and kept the amount of each check at or below $18,000.

[chriscross]

Except that this was a joint gift, written from a joint checking account, so the amount could be up to $36,000.

I am in the middle of completing this ridiculously complicated form that is intended for people with millions of dollars, property and trusts- not ordinary people trying to help out their children with basic needs. It is not simple, and the IRS instructions, as usual, are complicated and obtuse, with circular references and examples that are far beyond anything most people would encounter. A tax form written for the extremely wealthy and their accountants.

[taxlady28]

Yes you could have done it that way.  I gave my sister my checkbook and told her she could have $18,000 as a gift.  She rounded it off to $20,000 and I had to file a 709.

[DianeW777]

As indicated by @DavidD66, it is easily shifted to the grandchildren by writing a letter showing the gift splitting for each person. Keep this with your individual tax returns as proof should you ever need it. This would allow you to forego the Form 709 currently.  The key is to keep track of your gifts and as you indicated, it's not likely you will ever exceed the lifetime limit. 

@chriscross