I have quite a few CDs with my daughter as co-owner. I did that because I thought that she should have easy access to money in case I end up in assisted living. I am in my late 70s.

I just read somewhere that if she cashes more than $16,000 a year in CDs, that money is subject to gift tax. Is that true? Is there anything we can do to avoid it?

The only reason she would cash them instead of me is because I would be incapable. She does have power of attorney giving her the right to do anything on my behalf. Can she cash the CDs in my name?

Jane

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According to Jane <jblatz2@gmail.com>:

I have quite a few CDs with my daughter as co-owner. I did that because I thought that she should have easy access to money in case I end up
in assisted living. I am in my late 70s.

I just read somewhere that if she cashes more than $16,000 a year in CDs, that money is subject to gift tax. Is that true? Is there anything we can do to avoid it?

I'd expect the CDs to be considered to be 50/50 owned by you and her,
so if she cashes them and keeps the money, I suppose that's a gift. If
you funded them in the first place, that half interest was also a
gift, so you should probably consider the whole thing a gift.

There is a lifetime exemption from gift tax of about $11 million,
shared with the estate tax, so unless we're talking about seven digit
amounts, you file the gift tax return but you don't have to pay
anything.

If you are dealing with seven digit amounts, you presumably have paid
tax advisors who can give you real advice,
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John Levine, johnl@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly

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Jane <jblatz2@gmail.com> wrote:

I have quite a few CDs with my daughter as co-owner. I did that
because I thought that she should have easy access to money in
case I end up in assisted living. I am in my late 70s.

I just read somewhere that if she cashes more than $16,000 a year
in CDs, that money is subject to gift tax. Is that true? Is there
anything we can do to avoid it?

The answer depends on more facts. Putting money into a "joint
tenancy" bank account with a child (or anyone else) isn't considered
a gift at that time. It's considered as having been done for
convenience. It's only when money from the account goes to the other
joint tenant, in an unrestricted way that it becomes a gift. So if
your daughter takes money out at your request or for your benefit,
it's still considered your money, not hers. So you have not made a
gift of that money.

When a withdrawal is a gift, it's only reportable on IRS Form 709,
when total gifts for the year to that person exceed $16,000. Even
then it is highly unlikely that any gift tax will actually be due,
because each person has a lifetime of exemption of just a bit over
$12 million (scheduled to be cut in half for people dying after
2025).

The only reason she would cash them instead of me is because I
would be incapable. She does have power of attorney giving her the
right to do anything on my behalf. Can she cash the CDs in my
name?

In that case the withdrawal isn't a gift and doesn't have to be
reported as one.


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Stu
http://DownToEarthLawyer.com

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"John Levine" <johnl@taugh.com> wrote:

According to Jane <jblatz2@gmail.com>:

I have quite a few CDs with my daughter as co-owner. I did that
because I thought that she should have easy access to money in
case I end up in assisted living. I am in my late 70s.

I just read somewhere that if she cashes more than $16,000 a year
in CDs, that money is subject to gift tax. Is that true? Is there
anything we can do to avoid it?

I'd expect the CDs to be considered to be 50/50 owned by you and
her, so if she cashes them and keeps the money, I suppose that's a
gift. If you funded them in the first place, that half interest
was also a gift, so you should probably consider the whole thing a
gift.

Correct if it's held as tenants in common. If it's joint tenancy its
not considered a gift until it's cashed in.

There is a lifetime exemption from gift tax of about $11 million,
shared with the estate tax, so unless we're talking about seven
digit amounts, you file the gift tax return but you don't have to
pay anything.

The lifetime exemption amount is currently affected by inflation.
For people dying in 2022 it's $12,060,000. For people who die after
2025, the amount is currentlly scheduled to be cut in half.

If you are dealing with seven digit amounts, you presumably have
paid tax advisors who can give you real advice,

I agree with that completely.

--
Stu
http://DownToEarthLawyer.com

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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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<< to this newsgroup as well as our anti-spamming policy >>
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