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Posted by baybinthuhwoulds on May 14, 2008, 1:37 pm
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Would be very grateful for some informed opininons/pointers about what
are probable estate tax planning and also income tax
implications/solutions - and, preferably, cites to sources - that
address the following:
---------------
FACT ASSUMPTIONS:
>> The taxpayer in question has and has reason to believe she
will continue to have a very substantial yearly income and will not
die until sometime long after 2011;
>> Congress will amend the tax laws to increase the formerly
existing "cap" for Unified Tax Credit and estate tax purposes
substantially above levels in effect in 2002 but not eliminate all
estate tax and will maintain the yearly $11,000 gift tax exclusion at
or close to that sum;
>> The taxpayer in question will leave an estate when she
dies substantially greater in value than whatever such new
"cap"/levels may be - that is, will have a taxable estate - and will
be survived by several presently young children and a legally married
husband who she intends will be in some combination (perhaps not
relevant here to discuss) the sole beneficiaries of her estate.
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SCENARIO/QUESTIONS:
The high-income taxpayer's mother - who has only recently become
eligible for Medicare, is not eligible for SSI or SSD benefits, and
who, because of recent years of non-employment, will be receiving only
a comparatively very small amount of social security - is very
seriously debilitated and disabled by a severe combination of physical
and mental illnesses which require rehabilitative therapy and
caretaking expenses that probably will be needed over a period of
years and which this year alone have included non-insured hospitable
bills of more than $10,000 and (residential and rehabilitative)
nursing home care exceeding $20,000 which the taxpayer has paid on her
parent's behalf.
The parent, who presumptively will have a comparatively long life
span despite her debilitated medical condition, owns jointly with her
also unemployed and unemployable husband substantially less than $425K
in marketable securities plus a one-family residence owned jointly
with him, and has no source of income or ability to generate income
other than from recently and foreseeably decreasing interest earned on
the securities or, perhaps, from spending portions of that capital
plus borrowings as against the equity in the residence which, however,
if done, and if the other assets are spent down, would leave whichever
survives of the spouses without assets or (but for the questions posed
here) income.
The daughter/taxpayer, who does not presently have a contractual
or other law imposed obligation financially to support her mother, has
reason to believe that she will continue to be able and is willing to
pay for her mother's needed in-home or even nursing home care not
covered by Medicare and, in addition, also to provide an income to the
parent in the +/- $50K annual range - considerations which, however,
raise at least these questions (plus any others that informed folk
here may suggest) -
If the funds supplied to or on behalf of the parent constitute
more than fifty percent of her mother's support/maintenance, to what
if any extent are they deductible from the taxpayer's income taxes?
If the funds supplied to or on behalf of the parent constitute
more than fifty percent of her mother's support/maintenance and are
not presently deductible from the taxpayer's income taxes, what if
anything lawfully can be done to achieve such deductibility?
Bearing that the taxpayer already this year has expended on behalf
of her mother and mother's husband more than $22,000, although she had
not given each $11,000 directly, how if at all can the taxpayer
lawfully avoid having the IRS later claim that payments to the parent
or to third-party health care providers, etc., on the parent's behalf
are not gifts that eat into the Unified Tax Credit (thus, if such a
claim were to be made, interfering with what the taxpayer would like
eventually to leave to her young children and spouse) - or is this a
moot question and, if so, why?
Thanks very much!
--
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<< 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 >>
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Posted by Phil Marti on May 14, 2008, 2:20 pm
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> Would be very grateful for some informed opininons/pointers about what
> are probable estate tax planning and also income tax
> implications/solutions - and, preferably, cites to sources - that
> address the following:
I, for one, would be grateful if someone could explain to me why someone
with substantial assets and current earning ability would be wasting time
trying to get free advice on such complicated intertwined issues rather than
just plopping the whole thing in the laps of some very well-paid advisors
and getting on about peddling her mousetrap or, better yet, offering her
parents equivalent time in just being with them.
Citations not necessary.
--
Phil Marti
Clarksburg, MD
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Stuart Bronstein on May 14, 2008, 4:33 pm
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>> Would be very grateful for some informed opininons/pointers about
>> what are probable estate tax planning and also income tax
>> implications/solutions - and, preferably, cites to sources - that
>> address the following:
>
> I, for one, would be grateful if someone could explain to me why
> someone with substantial assets and current earning ability would
> be wasting time trying to get free advice on such complicated
> intertwined issues rather than just plopping the whole thing in
> the laps of some very well-paid advisors and getting on about
> peddling her mousetrap or, better yet, offering her parents
> equivalent time in just being with them.
Yeah, I got to the second paragraph that said she has "substantial
yearly income" and didn't feel like reading the rest of a long, complex
post.
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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by removeps-groups@yahoo.com on May 14, 2008, 5:25 pm
Please log in for more thread options On May 14, 10:37 am, baybinthuhwou...@isp.net wrote:
> The daughter/taxpayer, who does not presently have a contractual
> or other law imposed obligation financially to support her mother, has
> reason to believe that she will continue to be able and is willing to
> pay for her mother's needed in-home or even nursing home care not
> covered by Medicare and, in addition, also to provide an income to the
> parent in the +/- $50K annual range - considerations which, however,
> raise at least these questions (plus any others that informed folk
> here may suggest) -
Quite a long post. Is the child supporting the parent?
> If the funds supplied to or on behalf of the parent constitute
> more than fifty percent of her mother's support/maintenance, to what
> if any extent are they deductible from the taxpayer's income taxes?
They're not. Some people try to set up a corporation or sole
proprietorship and write off the amounts they want to give (such as
50k) in your case, as an expense such as salary. The amount would be
taxable to the recipient but the tax would be small, whereas the tax
savings to the giver is large. However, unless this is a real
business and there is real work, it is tax fraud.
The annual gift exclusion is 12k, not 11k. Amounts paid for medical
expenses for your qualifying parent don't count towards the 12k annual
limit. I'm not sure if the payments must be made directly to the
medical institution, but it's probably a good idea to do this. These
are deductible on the child's return, subject to the 7.5% limit.
http://www.irs.gov/publications/p502/ar02.html#d0e356
But talk to a pro to go over all your details and to get a good
strategy.
--
<< ------------------------------------------------------- >>
<< 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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by joetaxpayer on May 14, 2008, 5:49 pm
Please log in for more thread options removeps-groups@yahoo.com wrote:
> The annual gift exclusion is 12k, not 11k. Amounts paid for medical
> expenses for your qualifying parent don't count towards the 12k annual
> limit. I'm not sure if the payments must be made directly to the
> medical institution, but it's probably a good idea to do this. These
> are deductible on the child's return, subject to the 7.5% limit.
>
> http://www.irs.gov/publications/p502/ar02.html#d0e356
>
> But talk to a pro to go over all your details and to get a good
> strategy.
Yes, what he said.
So you can gift $24K/yr with no issue in addition to the medical bills.
Are you married? If so, you are up to $48K as spouse can gift as well.
If not, you should be filing gift returns for the difference. You can
also contrive a loan using their home as collateral, and forgive $24K
worth of interest/yr. If you are high income, that extra effort may not
be worth it. Just file the gift return.
Joe
www.blog.joetaxpayer.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 (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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