• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Gift Taxes

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

Rimnod

Junior Member
What is the name of your state (only U.S. law)? Georgia

In 2014 my wife went and opened custodial accounts for each of our minor children (2 kids with $50,000 put into each account). She did this with the intention of using it as a college fund. I tried to discourage her from doing this but I usually lose these type of arguments (which is why we file separate taxes every year). At any rate I am getting taxes ready this year and am researching around and it seems to me that she should have filed a Gift Tax return (Form 709) and paid tax on the contribututions made into the custodial accounts made in excess of $14,000 (which mean she owes a lot of money).

I am looking for ways in which to reverse this error some way but understand that the "gift" is irrevocable. However I see references to the possibility that the person receiving the gift can disclaim it within 9 months of turning age 21 (the kids are 17 and 18 years old now). Is it possible my wife can get out of filling the gift tax return now with the intent that the gifts will be disclaimed three years hence? Are there any other options to reverse this mistake?
 


tranquility

Senior Member
What is the name of your state (only U.S. law)? Georgia

In 2014 my wife went and opened custodial accounts for each of our minor children (2 kids with $50,000 put into each account). She did this with the intention of using it as a college fund. I tried to discourage her from doing this but I usually lose these type of arguments (which is why we file separate taxes every year). At any rate I am getting taxes ready this year and am researching around and it seems to me that she should have filed a Gift Tax return (Form 709) and paid tax on the contribututions made into the custodial accounts made in excess of $14,000 (which mean she owes a lot of money).

I am looking for ways in which to reverse this error some way but understand that the "gift" is irrevocable. However I see references to the possibility that the person receiving the gift can disclaim it within 9 months of turning age 21 (the kids are 17 and 18 years old now). Is it possible my wife can get out of filling the gift tax return now with the intent that the gifts will be disclaimed three years hence? Are there any other options to reverse this mistake?
File the returns now. What's the problem? There is not going to be any tax due unless you have especially generous through your lifetimes. You might get a minimum penalty for each late return, but that is not always the case.
 

davew128

Senior Member
Good point. With gift splitting, you're only talking about 44,000 in total reportable gifts split between two people.
If it was intended as a college fund, then a 529 plan would have been the best choice since it allows front loading of annual exemptions. Since whats done is done, I think the splitting idea is the most practical way out of a less than ideal situation. Do I fret over lifetime exemptions much anymore? No. Still, why use it when you don't have to.
 

tranquility

Senior Member
If it was intended as a college fund, then a 529 plan would have been the best choice since it allows front loading of annual exemptions. Since whats done is done, I think the splitting idea is the most practical way out of a less than ideal situation. Do I fret over lifetime exemptions much anymore? No. Still, why use it when you don't have to.
You never know where the hidden hairy hand of the government will reach for additional revenues. Even though Estate and Gift taxes were never a big revenue raiser, we did have the limit at $1,000,000 not that long ago.
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top