Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?
This is your opportunity to ask questions. No question too simple or too silly.
Culture war topics are accepted, and proposals for a better intro post are appreciated.
Jump in the discussion.
No email address required.
Notes -
My parents are giving me $250k because they gave an equivalent amount to my sister so she could buy an apartment in London. I don't really want the money and have tried to argue them out of giving it to me (would rather they enjoy their retirement) but they are insistent, especially since they gave it to my sister. Being able to pay in cash for a house in Baltimore (if I stay here) would be pretty huge, but I'm not sure where I will be in a few years time so a house doesn't seem like a great use of time or money right now. Should I just keep it in the market until then (transferring to my preferred stock/bond distributions where appropriate)? Are there any other big ticket items that I should consider purchasing? A car would probably be useful, both for my practical and romantic life, but if I move to Europe in the next two years (maybe 30% chance), it's a terrible investment. I could also donate most of the money to charity, but that feels both like slapping my parents in the face, and potentially making life much more difficult for myself. Even if the money were to just sit in money market, it would be an extra $10k of income a year, which is substantial.
Are your parents aware that this is a taxable event, and that they are essentially throwing a large chunk of that money at the government by not structuring it properly?
If they are aware and you are simply eliding structural details, then... carry on! But I can imagine they are not aware simply because the previous gift took place internationally and so may have been overlooked by taxing authorities. Of course, the IRS doesn't always notice these things, but often they do.
You might thus "discourage" the gift by requesting that they structure it for tax avoidance, e.g. by creating an appropriately drafted trust (use a reputable lawyer, this should cost somewhere between several hundred and a few thousand dollars depending on the details, much less than the anticipated tax bill). Of course, you then must rethink the timing of your benefits.
They are structuring it appropriately I believe. I am going to have to pay capital gains tax, and they arguing to have to pay some kind of inheritance tax, but I don't claim to understand the details on their end.
If you have the time, you could also structure it over time to fall within the IRS gift limit: This year they could each give you $19k without federal tax implications. Ask a real professional about capital gains basis changes and state implications, though.
They said that this is what they should have been doing but didn't plan ahead.
Looks like federal capital gains are 15%, and state is 4.75% if I stay under 100k total income and 5% if I stay under 150k. The smartest plan seems to be for me to wait until I need the money but otherwise cash out less than $50k a year.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link