gifting and taxes - this doesn't sound right to me...

What is the name of your state? NJ


my partner's grandfather died leaving the sizeable estate to his wife (partner's grandmother). the family is looking into ways to reduce eventual taxes and talked about gifting this year. the advice given by the lawyer, however, does not sound correct to me:

the grandmother wants each of four heirs to receive $20K. the heirs are the grandparents' two children and two grandchildren. according to the lawyer the two children will be exempt from taxes while the two grandchildren will have to pay taxes on each of their $20K.

i say that the grandmother gifts eight people $10K each (heirs' spouses, partners...) and those people in turn simply hand over their share to the heirs for a completely tax-free transaction. i am not an expert by any means , however, so i wanted some feedback on both scenarios here...

thanks.

[Snipes5]

Recipients do not pay tax on gifts.

The lawyer is probably thinking of Generation-Skipping Transfer Tax, which does not apply in a gifting situation.

Your scenario is best. Or, Grandma could simply gift each of the four recipients $10,000 now, in 2004, and $10,000 each in 2005, say in January. That way there is no tax, no gift tax return need be filed, and everyone is happy except the attorney, who will probably be out the fees for preparing the gift return, since one won't be needed.

Snipes

beautiful. i didn't want to jump in and disagree with legal advice, but i thought i was right and wanted to make sure...

so, again, thanks much for the answer.