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Is giving money to adult children before death considered inheritance or gift? If a gift do taxes need to be paid on the gift.

Jefferson City, TN |

My dad passed away almost 2 years ago. My mother can not maintain her house on just Social Security, so she has sold her house and decided to have us build an apartment basement for her in my house since I am the primary caregiver. Because she wanted to be "fair" with my brother who lives in another state, she asked me to send him some money that was over $30,000. Is he taxed on this? Am I liable for any taxes since this will be her living space?

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Attorney answers 5


Giving money to an adult child before death is a gift not an inhertiance. On the amount involved there would be no federal gift taxes owed although a federal gift tax return would need to be filed. You need to consult a TN attorney regarding whether TN has a gift tax. I think the TN gift tax was repealed as of January 1, 2012.


The short answer: this would not be considered inheritance, this would be considered a gift. Part of the money would not be subject to the various taxes that the state of Tennessee and/or the federal government imposes on gifts, and part of it would. These taxes, and other transfer implications, can get very complicated, very quickly. A short sit-down with a qualified attorney can save you, your brother, and your mother a lot of financial headaches down the road. There may be things that have happened that would be taxable that you are not considering and would never even think would qualify. Speaking with an estate planning attorney would probably serve you very well.

Many attorneys will provide you advice without needing to plan your mother's entire estate. For just a few hours of an attorney's time, your mother would likely be able to have everything clearly delineated for her so there is no confusion about what does and does not qualify. I recommend you speak with an estate planning attorney for further guidance.

This advice being provided in no way represents the formation of a lawyer client relationship. This is advice only based on limited information. The advice seeker should seek an in-person meeting with a qualified attorney to discuss his or her issue.


Your brother will not be taxed on the gift. Your mother must file a gift tax return ("Form 709) for 2013 because the gift is over $14,000. She will not have to pay any tax on the gift, but the $30,000 will be deducted from her $5,000,000 exemption. If your mother is paying for the remodeling of the space, she should report the $ amount on the same gift tax return - and take the same deduction from her $5,000,000 exemption. No one has to pay any tax.


It would be a gift.
if over $14,000 a person-a 709 gift tax would need to be filed.
However-an election not to pay the tax and use part of the 5.2m lifetime
exemption can be used.
Tax basis becomes an issue on real estate and stocks(see your CPA).

The answer given does not imply that an attorney-client relationship has been established and your best course of action is to have legal representation in this matter.


Generally, when a parent gives an adult child money, that money is a gift (an inheritance would occur after the parent dies). There is a limit set by the IRS for gifts which do not have tax consequences for the parent or the adult child. For tax year 2013, the Internal Revenue Service has announced that the annual exclusion for gifts is $14,000 per year per person for 2013, up from $13,000 for 2012. The donor (the parent in this case) is responsible for taxes on gifts higher than the exclusion, unless there is a written agreement that the receiver (the child) is to be responsible. Since the gift to your brother you are describing sounds as if it is in excess of the gift tax exclusion, your mother should advise her accountant so that the gift tax issue, as well as any other tax consequences from the sale of her home, may be handled appropriately. Whether or not you have any tax consequences depends on the nature of your agreement with your mother - such as whether she is renting the apartment from you (in which case you may have rental income to report). You may also want to talk with an accountant about this arrangement. Good Luck.