Regarding Gift tax and Generation-Skipping Tax

[BenBarron]

What is the name of your state? Georgia.

I've read countless articles and plenty of threads on this site, but I figured I'd put my particular situation out there and get some answers!

I had a brother who died in the military and my grandmother received $400,000 dollars as his life insurance beneficiary. She wants to give my mother and myself $130,000 dollars each.

Again, I've read and read and read so I know she simply needs to file form 709 and report the gifts. I also know my mother and I need not worry about paying any tax except on the interest gained from the gifts once in our bank accounts. But...

As her grandson, will the generation skipping tax throw a wrench in the works? Does the gift tax and GST have the same lifetime exclusions? She's never gifted any amount over $12,000 in her lifetime and her estate when she passes away will be well under the $740,000 remaining after gifting the both of us...so no worries there, but it would be terrible if this April, she files form 709 and all of a sudden owes a ton of money because she gave her grandson $130,000.

Also, does her having (after gifting us) $140,000 in the bank mean she is no longer eligible for medicare/medicaid etc.

Thanks for reading my long-winded rant here. Any advice would help.

[LdiJ]

Originally Posted by BenBarron

What is the name of your state? Georgia.

I've read countless articles and plenty of threads on this site, but I figured I'd put my particular situation out there and get some answers!

I had a brother who died in the military and my grandmother received $400,000 dollars as his life insurance beneficiary. She wants to give my mother and myself $130,000 dollars each.

Again, I've read and read and read so I know she simply needs to file form 709 and report the gifts. I also know my mother and I need not worry about paying any tax except on the interest gained from the gifts once in our bank accounts. But...

As her grandson, will the generation skipping tax throw a wrench in the works? Does the gift tax and GST have the same lifetime exclusions? She's never gifted any amount over $12,000 in her lifetime and her estate when she passes away will be well under the $740,000 remaining after gifting the both of us...so no worries there, but it would be terrible if this April, she files form 709 and all of a sudden owes a ton of money because she gave her grandson $130,000.

Also, does her having (after gifting us) $140,000 in the bank mean she is no longer eligible for medicare/medicaid etc.

Thanks for reading my long-winded rant here. Any advice would help.

This would not be a generation skipping transfer. Its a simple gift.

Her having money in the bank wouldn't make her ineligible for medicare, but it definitely would impact medicaid.

[ShyCat]

The entire $400,000 will be considered in Medicaid (welfare) calculations for the next 5 years. Grandmother cannot rely on Medicaid (i.e., taxpayers) to pay for care that she could have paid for with the insurance money she gave away.

[tranquility]

I think it would implicate the GST. Gift and GST taxes are seperate (and why GST can be so tough) . I'm pretty sure that in 2004 they changed the GST lifetime exemption as being the same as in the estate tax (not gift). I think that last and this year that is $2 million and next year, $3.5 million. You would need to file returns, but I don't believe taxes will need to be paid.

But, on any big deal involving hundreds of thousands of dollars, see a professional who will review the specific facts.

[davew128]

Originally Posted by LdiJ

This would not be a generation skipping transfer. Its a simple gift.

Well a gift to a skip person such as a gransdon absolutely is subject to GST.