direct payment methodology

[timseims]

What is the name of your state? WV

My son is willing to pay my medical expenses, but to avoid gift taxes he must do so directly. It is an administrative burden for him to pay nickles and dimes for every medical expense I have. Can I facilitate these payments somehow, for example, could I have a power of attorney to pay my bills out of an account that he has to replentish only occasionally? Just simply my paying out of a joint checking account would work, but I believe that payments out of a joint account through checks signed by me would be considered indirect. Is that correct?

Thanks,

[FlyingRon]

How much medical expense are we talking about? He can give you $12,000 each year before he has to worry about it. Even then, he gets a lifetime credit (among all gifts over $12,000 he gives to all) that covers him up to a million.

I assume by your "nickle and dime" scenario, you want him not to have to write checks for each bill as it comes in. Sure, set up a bank account in his name alone. Frankly, the easiest way to handle this if you're computer savvy is to just set up internet/computer bill pay. Never have to sign a check, never have to put a stamp on the envelope, I pay all my bills this way if I can.

[LdiJ]

Originally Posted by FlyingRon

How much medical expense are we talking about? He can give you $12,000 each year before he has to worry about it. Even then, he gets a lifetime credit (among all gifts over $12,000 he gives to all) that covers him up to a million.

I assume by your "nickle and dime" scenario, you want him not to have to write checks for each bill as it comes in. Sure, set up a bank account in his name alone. Frankly, the easiest way to handle this if you're computer savvy is to just set up internet/computer bill pay. Never have to sign a check, never have to put a stamp on the envelope, I pay all my bills this way if I can.

There are another couple of easy options as well. He could give you a debit card on the account, or even give you a credit card to use. As long as its in his name, and he is paying the credit card bills, you are home free.

[timseims]

Hi,

Thanks for the advice. As to the amount we're talking about, I'd like my son to be able to give me the $12k plus medical expenses since they don't fall under any of the limits. Even if I'm not sick medical expenses probably equal about $10k/year.

It sounds like what you're saying is that as long as the bank account, debit card, credit card, or whatever is in his name I can write the checks, make the charges, or initiate the electronic transfer. I don't know how easy it is to write checks or make credt card charges using an account in somebody else's name, but that's a question for my bank.

The essential issue is that if somebody is making enough money that they are willing to give you a significant amount, they are probably busy and disinclined to write 5 or 6 checks every month. For example, tuition expenses are also excluded from gift tax limitations, but paying one or two tuition bills directly every year is not the same as paying the $10 co-payment every time you get a prescription filled.

Thanks,

Tim

[Veronica1228]

Originally Posted by timseims

Hi,

Thanks for the advice. As to the amount we're talking about, I'd like my son to be able to give me the $12k plus medical expenses since they don't fall under any of the limits. Even if I'm not sick medical expenses probably equal about $10k/year.

It sounds like what you're saying is that as long as the bank account, debit card, credit card, or whatever is in his name I can write the checks, make the charges, or initiate the electronic transfer. I don't know how easy it is to write checks or make credt card charges using an account in somebody else's name, but that's a question for my bank.

The essential issue is that if somebody is making enough money that they are willing to give you a significant amount, they are probably busy and disinclined to write 5 or 6 checks every month. For example, tuition expenses are also excluded from gift tax limitations, but paying one or two tuition bills directly every year is not the same as paying the $10 co-payment every time you get a prescription filled.

Thanks,

Tim

I wouldn't advise using anything for payment that is in someone else's name. The only reason is that, legally, your son could decide one day to dispute items that he did not authorize (i.e. sign himself) and all he would have to do is sign an affi to get the funds back. You could then be in a lot of hot water for doing that kind of thing...with the FI and the law.

Get a joint account so that all payments that are made are legally authorized.

[LdiJ]

Originally Posted by Veronica1228

I wouldn't advise using anything for payment that is in someone else's name. The only reason is that, legally, your son could decide one day to dispute items that he did not authorize (i.e. sign himself) and all he would have to do is sign an affi to get the funds back. You could then be in a lot of hot water for doing that kind of thing...with the FI and the law.

Get a joint account so that all payments that are made are legally authorized.

That doesn't work, because then he is not paying the bills directly. However, she could be an authorized signer rather than a joint account or card holder.

[Veronica1228]

Originally Posted by LdiJ

That doesn't work, because then he is not paying the bills directly. However, she could be an authorized signer rather than a joint account or card holder.

The only problem with that is that most banks only allow that an all parties be a joint holder on a personal account. The one exception is a POA. Authorized signers are only for business accounts.

[LdiJ]

Originally Posted by Veronica1228

The only problem with that is that most banks only allow that an all parties be a joint holder on a personal account. The one exception is a POA. Authorized signers are only for business accounts.

I am thinking more along the lines of a credit card....and someone CAN be an authorized signer on a credit card without being a joint cardholder. There are also some banks that allowed authorized signers on personal accounts also.

[Veronica1228]

Originally Posted by LdiJ

I am thinking more along the lines of a credit card....and someone CAN be an authorized signer on a credit card without being a joint cardholder. There are also some banks that allowed authorized signers on personal accounts also.

No bank that I've ever worked at, or have done market research on would allow an authorized signer on a personal account. From a legal standpoint, it confuses things when it comes to the ownership of the funds which has to be determined for many legal purposes. Garnishment, funds verifications for T19 and SSI, death, taxes, and many others. Any FI that would allow this really needs to get a better legal department.