Dad wants to share grandmother's estate with us- up to $13k/year tax-free?

[allfiredup]

What is the name of your state (only U.S. law)? GEORGIA

My grandmother passed away recently and my dad is the sole beneficiary of her estate. He inherited approximately $350k in real estate and $30k in cash in accordance with her will. He also received $20k from her life insurance policy and he was listed as the beneficiary on an annuity that is worth about $28k.

My dad wants to divide the cash and the annuity death benefit equally with me and my sister- each getting one-third. That would be roughly $20k for each of us. But I want to avoid paying any gift tax, if possible. If he gave us each $13k now and then $7k next year, that would not be taxable, correct?

Dad is also the executor of her estate and I filed the papers to start the probate process two weeks ago for him. The bank has required her checking account to be closed and the balance transferred to a new account in the name of the "Estate of ....". Does dad need to wait until probate is complete before writing checks to us out of that account? (The estate has $0 debt of any kind- all medical bills are paid off, no mortgages).

Thanks in advance for your expert advice!

 

[anteater]

Does dad need to wait until probate is complete before writing checks to us out of that account? (The estate has $0 debt of any kind- all medical bills are paid off, no mortgages).

As in most things, one could take the expeditious, quick-and-dirty way and there may never be any unforeseen negative consequences.

But Dad would be much better off taking the cautious route by waiting to conclude probate, distribute the assets to himself, and then making the gifts.

 

[LdiJ]

As in most things, one could take the expeditious, quick-and-dirty way and there may never be any unforeseen negative consequences.

But Dad would be much better off taking the cautious route by waiting to conclude probate, distribute the assets to himself, and then making the gifts.

I agree. However, since the estate is fairly substantial and there are other assets, dad could certainly distribute a portion of the cash assets to himself fairly quickly, and then gift those assets to his children.

It is correct that dad could gift his children 13k each this year and 7k each next year without any gift tax consequences.

 

[anteater]

I agree. However, since the estate is fairly substantial and there are other assets, dad could certainly distribute a portion of the cash assets to himself fairly quickly, and then gift those assets to his children.

I was thinking of mentioning a partial distribution. But wondered if he might have to get court approval for that. I remember that GA has a couple forms of probate - "common form" and "solemn form" I believe they are called. If it is solemn form, a preliminary distribution might need the court's approval. And I get a bit jittery when someone mentions that filing to open probate has just occurred and seems so sure that there are no creditors. Maybe there aren't, but better to wait until the period for creditor claims has expired.

Ya know... Re-reading the original post, the OP mentions life insurance and annuity proceeds - and that Dad was a named beneficiary for the annuity. Does not mention if he is the designated beneficiary of the insurance. That's at least $28K, and possibly $48K, that should come to him directly and not through the probate estate. He could begin making the gifts from those funds.

 

[LdiJ]

I was thinking of mentioning a partial distribution. But wondered if he might have to get court approval for that. I remember that GA has a couple forms of probate - "common form" and "solemn form" I believe they are called. If it is solemn form, a preliminary distribution might need the court's approval.

Ya know... Re-reading the original post, the OP mentions life insurance and annuity proceeds - and that Dad was a named beneficiary for the annuity. Does not mention if he is the designated beneficiary of the insurance. That's at least $28K, and possibly $48K, that should come to him directly and not through the probate estate. He could begin making the gifts from those funds.

Good Point...