Cross posted on the RE board:

Mom and dad divorced after owning house for 10 years.

Dad said mom could stay in house until the youngest finished high school - another 12 years.

Dad is remarried and "does not really need the money".

4 kids range from 35 yo - 20 yo and could use the money(payoff school loans, down payment on their own home, etc) so dad has said he plans to give his 50% of the equity to kids. Guessing this will be approximately $75k. (divided by 4 is $18,750 per kid).

What is the best way to do this? Concern is dad takes money, pays appropriate taxes on it and then goes to give it to the kids and it is over the $10k a year gift limit and creates another IRS action/tax etc.

Thanks.

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What is the best way to do this? Concern is dad takes money, pays appropriate taxes on it and then goes to give it to the kids and it is over the $10k a year gift limit and creates another IRS action/tax etc.

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My understanding is that you only pay gift tax once you have gone over the $11 million lifetime exemption. If you go above the annual limit ($15k), then you simply have to file a gift tax return, even though you won't actually owe anything (assuming you are still under the $11MM limit).

The annual gift amount is 15k per person (which exempts you from filing a gift tax return). So your dad and step mom can gift you 30k in one year.

If this is his own separate property he is giving to the kids, and doesn't want to use step-mom to increase annual gifting capacity to $30k, just have him give $15k each kid this year. Then, in January top off to the desired amount with an extra gift. Easy-please.... no forms for the IRS. No need to involve kids in ownership of house at any point.

Biggest issue will be getting Mom to leave the house.

Treichler said:

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Mom and dad divorced after owning house for 10 years.

Dad said mom could stay in house until the youngest finished high school - another 12 years.

4 kids range from 35 yo - 20 yo

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A 20 year old has 12 years until graduating high school?

gig em 02 said:

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Treichler said:

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Mom and dad divorced after owning house for 10 years.

Dad said mom could stay in house until the youngest finished high school - another 12 years.

4 kids range from 35 yo - 20 yo

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A 20 year old has 12 years until graduating high school?

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You're reading it incorrectly. At the time of divorce, he said she could stay in house till all kids were out of high school, which would be in about 12 more years.

That 12 more years happened, Dad is remarried, doing fine, and says he plans on giving his half of the house to his 4 kids, for which the poster is one.

Make the gift over 2 years. Just don't go over the $15,000 in either year.

gig em 02 said:

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satexas said:

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gig em 02 said:

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Treichler said:

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Mom and dad divorced after owning house for 10 years.

Dad said mom could stay in house until the youngest finished high school - another 12 years.

4 kids range from 35 yo - 20 yo

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A 20 year old has 12 years until graduating high school?

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You're reading it incorrectly. At the time of divorce, he said she could stay in house till all kids were out of high school, which would be in about 12 more years.

That 12 more years happened, Dad is remarried, doing fine, and says he plans on giving his half of the house to his 4 kids, for which the poster is one.

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You sure? That says "another 12 years", not "12 years ago". I'm certainly not reading it incorrectly, but it may be written incorrectly.

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Regardless, it's what he meant, and I'm not here to argue with you. The rest of us understood and answered things as he asked/meant.

At 20 years old they are an adult and if they want to spend 12 more years to graduate high school that is their business. I know a lot of people from Texas Tceh who waited until their late 20s to finish high school.