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Subject Author Date
Gifts as advance on inheritance Earl Kiosterud 02-02-2007
Posted by Earl Kiosterud on February 5, 2007, 1:31 am
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>> I need to add this. The idea is not to have to change the
>> will -- just get agreement from the beneficiary and leave
>> the will as is.
>>
>> Moderator:
>> I am not an attorney, but this sounds like a codicil that
>> can be added to the will without an agreement from the
>> beneficiary. At worst, if the gifter dies within three
>> years (I believe) of the gift, the gift will be added back
>> into the estate. Otherwise I see no tax ramifications.
>> Talk to your attorney.

> Yes a provision can be made in a will or codicile to do just
> what the OP wants, without having to get the agreement of
> any beneficiary.

The benefactor is in ill health, no longer able to make
decisions. It's not certain how long he will live. There
are power of attorneys (financial) who want to start doling
out money to the beneficiaries, $12K per year. They can't
change the will. They'd like to get the beneficiaries to
agree to a reduced settlement, as a function the gifts that
have been made. The total benefit would be the same, but
some would arrive early. Will the IRS accept this? Also,
the enforceablilty of such an agreement is an issue, and
off-topic in this forum, but perhaps someone could also
comment on that.

--
Earl Kiosterud
www.smokeylake.com

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Posted by Stuart A. Bronstein on February 5, 2007, 8:22 pm
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>> Yes a provision can be made in a will or codicile to do just
>> what the OP wants, without having to get the agreement of
>> any beneficiary.

> The benefactor is in ill health, no longer able to make
> decisions. It's not certain how long he will live. There
> are power of attorneys (financial) who want to start doling
> out money to the beneficiaries, $12K per year. They can't
> change the will.

In that case he probably has no legal capacity to make
gifts, either. Normally a power of attorney or trust does
not give the power to make gifts for someone else unless
it's stated explicitly and clearly.

> They'd like to get the beneficiaries to
> agree to a reduced settlement, as a function the gifts that
> have been made. The total benefit would be the same, but
> some would arrive early. Will the IRS accept this?

I don't see how it matters what the IRS thinks in this
situation, unless it somehow reduces the total taxes due.
And if that happens and there is no explicity authority to
make gifts on his behalf, they will only care about the
extra tax, not the gifts themselves.

> Also, the enforceablilty of such an agreement is an issue, and
> off-topic in this forum, but perhaps someone could also
> comment on that.

I imagine that the agreement would be enforceable - it's
really up to the probate judge if anybody challenges it.
But since pre-death gifts in this case are not likely to be
legally valid, I doubt it makes much of a difference.

Stu

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Earl Kiosterud on February 6, 2007, 9:39 pm
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>>> Yes a provision can be made in a will or codicile to do just
>>> what the OP wants, without having to get the agreement of
>>> any beneficiary.

>> The benefactor is in ill health, no longer able to make
>> decisions. It's not certain how long he will live. There
>> are power of attorneys (financial) who want to start doling
>> out money to the beneficiaries, $12K per year. They can't
>> change the will.

> In that case he probably has no legal capacity to make
> gifts, either. Normally a power of attorney or trust does
> not give the power to make gifts for someone else unless
> it's stated explicitly and clearly.

>> They'd like to get the beneficiaries to
>> agree to a reduced settlement, as a function the gifts that
>> have been made. The total benefit would be the same, but
>> some would arrive early. Will the IRS accept this?

> I don't see how it matters what the IRS thinks in this
> situation, unless it somehow reduces the total taxes due.
> And if that happens and there is no explicity authority to
> make gifts on his behalf, they will only care about the
> extra tax, not the gifts themselves.

>> Also, the enforceablilty of such an agreement is an issue, and
>> off-topic in this forum, but perhaps someone could also
>> comment on that.

> I imagine that the agreement would be enforceable - it's
> really up to the probate judge if anybody challenges it.
> But since pre-death gifts in this case are not likely to be
> legally valid, I doubt it makes much of a difference.

The Power of Attorney document specifically gives them
authority to make gifts that the benefactor would
"reasonably expected to give" I think was the wording.
Since they're in his will, this seems reasonable. This is
to start giving them the money sooner, but no more total
money. It could be argued that he'd have done this (give
the gifts and reduce the benefit) had he remained in good
mental condition.

The gifts would reduce the estate tax, as they'd reduce the
size of his estate, which is greater than the exclusion
amount ($2 Million for 2007 and 2008), and would still be
after the gifts were made. So the question is could/would
the IRS regard this as an improper way to reduce the estate
tax.

--
Earl Kiosterud
www.smokeylake.com

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Stuart A. Bronstein on February 7, 2007, 7:48 pm
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>> I imagine that the agreement would be enforceable - it's
>> really up to the probate judge if anybody challenges it.
>> But since pre-death gifts in this case are not likely to be
>> legally valid, I doubt it makes much of a difference.

> The Power of Attorney document specifically gives them
> authority to make gifts that the benefactor would
> "reasonably expected to give" I think was the wording.
> Since they're in his will, this seems reasonable. This is
> to start giving them the money sooner, but no more total
> money. It could be argued that he'd have done this (give
> the gifts and reduce the benefit) had he remained in good
> mental condition.

If he never made such gifts before, there's a good chance a
court would determine that they are not gifts he "would
have" made. Again, it depends on local law and exactly how
the power of attorney is drafted.

In general a power of attorney does not give someone the
power to act as trustee of a trust. So if the property is
in the trust and it's the power of attorney that has the
gifting clause, not the trust, that is another possible
source of trouble.

> The gifts would reduce the estate tax, as they'd reduce the
> size of his estate, which is greater than the exclusion
> amount ($2 Million for 2007 and 2008), and would still be
> after the gifts were made. So the question is could/would
> the IRS regard this as an improper way to reduce the estate
> tax.

It's not improper if the gifts are legal exercises of the
power of attorney. Assuming the gifting scheme is legal
(without knowing more I'd say it's about 50/50 based on what
you've said) an agreement such as you suggest would likely
be enforceable.

But with the amount of money you are talking about, it makes
good sense to talk to a local lawyer who can look at the
actual documents and check state law as it applies to your
precise facts.

Stu

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Earl Kiosterud on February 10, 2007, 6:24 am
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>>> I imagine that the agreement would be enforceable - it's
>>> really up to the probate judge if anybody challenges it.
>>> But since pre-death gifts in this case are not likely to be
>>> legally valid, I doubt it makes much of a difference.

>> The Power of Attorney document specifically gives them
>> authority to make gifts that the benefactor would
>> "reasonably expected to give" I think was the wording.
>> Since they're in his will, this seems reasonable. This is
>> to start giving them the money sooner, but no more total
>> money. It could be argued that he'd have done this (give
>> the gifts and reduce the benefit) had he remained in good
>> mental condition.

> If he never made such gifts before, there's a good chance a
> court would determine that they are not gifts he "would
> have" made. Again, it depends on local law and exactly how
> the power of attorney is drafted.
>
> In general a power of attorney does not give someone the
> power to act as trustee of a trust. So if the property is
> in the trust and it's the power of attorney that has the
> gifting clause, not the trust, that is another possible
> source of trouble.

>> The gifts would reduce the estate tax, as they'd reduce the
>> size of his estate, which is greater than the exclusion
>> amount ($2 Million for 2007 and 2008), and would still be
>> after the gifts were made. So the question is could/would
>> the IRS regard this as an improper way to reduce the estate
>> tax.

> It's not improper if the gifts are legal exercises of the
> power of attorney. Assuming the gifting scheme is legal
> (without knowing more I'd say it's about 50/50 based on what
> you've said) an agreement such as you suggest would likely
> be enforceable.
>
> But with the amount of money you are talking about, it makes
> good sense to talk to a local lawyer who can look at the
> actual documents and check state law as it applies to your
> precise facts.

Stuart,

Thank you for the information.

--
Earl Kiosterud
www.smokeylake.com

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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