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Attorney-in-fact and Gifting

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Zizi

Registered User
What is the name of your state? PA

I just joined this site and was reading several posts trying to familiarize myself on Gifting and the form(s) required. I came across two posts that got me thinking and started me worrying. I'm referring to a post by Grammy5 on 01-08-2003, "Gifting - who can?" and one by Nostalgic on 02-08-2003 (just a few posts ago), "Power of Attorney."

Here's my situation: My 95-year-old grandmother appointed me as her Attorney-in-Fact 6 years ago. For the past 4 years I have filed her tax returns and signed them. Last July she gave me $300,000 in cash which I added to my personal assets. By her request the money is to be used for her medical care, as she is ill and living in an assisted-care facility. After she is gone I am to take care of my elderly mother and father with what is left from the money. If anything is left after they are gone I am to keep the remaining money for me and my family.

We are a very close family and trust in our family has always been implicit. My grandmother's mental condition was beginning to decline at the time and she wanted to give the money before she was unable to reason for herself. In fact, over the last several months her mental condition has declined quite a bit. Although she has never been legally deemed incompetent she is not capable of handling her own finances anymore. I take care of everything. In the document that made me her Attorney-in-Fact it pretty much states that I can do with the money whatever needs to be done. My grandmother put virtually no stipulations in the document as she knew that I would carry out her wishes just as she gave them to me.

My concern is what is the IRS going to think when they see a return that I sign that gifts money to me? In one of the posts I mentioned above, a poster named abezon refers to something called "self-dealing."

I know it's after the fact, but will I be doing something illegal by filing and signing a return that gifts money to me? Is it legal to do this? I certainly don't want to run into problems with the IRS.
Although my grandmother's mental health has drastically declined, should I have her sign the return anyway? Then that would look odd that I signed the last 4 returns and now she signs the latest. I simply don't know what to do.

Please help! Any information will be greatly appreciated.
 
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abezon

Senior Member
The IRS doesn't care about self-dealing. The people who would be able to challenge the gift are the people who would have inherited it if it hadn't been given to you. IE, your parents + any aunts/uncles/siblings/cousins. Even then, they'd have to go to a judge & convince her that grandma would not have given you that money of her own free will. If you can show a history of using the money as she wished, they will have a hard time doing so.

If grandma is still competant, you might want to get her to sign something saying that the gift was her idea & why she gave it to you & what she expects you to do with it. This will help show that you're following her wishes & have not benefited personally from her gift.
 

Zizi

Registered User
Thank you so much, abezon. Now I (and my husband, too) can get some sleep tonight. This was weighing on my mind like you wouldn't believe.

By the way, my parents already know her wishes and there are no others to consider (aunts, uncles, siblings, etc.). It's just me. Even when there were a few still alive they didn't want bothered with helping her :-(
 
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