So, my grandfather passed away and gave all his money to my dad, his brothers and sister. The only instructions he gave in his will was to give equal shares to each of his kids, asking them in turn to give their kids (my generation) whatever might need for school and medical expenses. I needed a lot of dental work done so I asked for $20k, was given that. But then at the same time I got an insurance settlement for an accident a while back which covered most everything, so I'm actually going to keep around $15k or so.
Now, I'm trying to be as smart as possible with the money. My FAFSA is already in for school, EFC is $0, and I don't want that to change. Then again I'm not sure if maybe I should overpay and cancel student loans -- but they have no interest.. should I invest? will I have to pay taxes?
I'm really not clear on if or what taxes cover this, because it wasn't technically an inheritance but a gift from a parent.
My instinct says 'go buy gold and hide it'. What do you think? Any other ideas?
Wed Sep 03, 2014 5:45 pm
blixet Preferred Member
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There aren't any taxes due on gifts or inheritances. I definitely wouldn't pay off any no interest loan earlier than required. Gold? No. Do you expect to have any earned income this year? If so, maybe opening a Roth IRA could be an option if you are in a low marginal tax bracket. Or is appearing to have no assets more important at this point?
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Wed Sep 03, 2014 7:12 pm
littleroc02us Moderator
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Inheritances aren't taxed unless it's million's. (5 mill to be exact) If your dad gifted you money then he can only give 14k for the year of 2014 and the same amount for years to come unless the government allows more.
Risk comes from not knowing what you're doing. (Warren Buffet)
Thu Sep 04, 2014 3:46 pm
blixet Preferred Member
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Just for a little more accuracy (not trying to be PITA, really!)...
Neither gifts nor inheritances are taxed at the federal level (I mean taxable to the recipient). It is true that an estate may be taxed, although the actual exact exemption is $5,340,000 (a few hundred thou here or there... ).
As far as gifting goes, there are a couple of things to consider. While it is true that the annual gift exclusion is $14k this year, if the father is married the $20k can be considered to be be gifted jointly by the father and his wife which would allow for $28k per donee. And in any event, an amount over $14k isn't taxable as long as the father's estate (including amounts gifted in excess of the annual exclusion) at the time of his death doesn't exceed the estate tax exclusion. Technically, only Form 709 would need to be filed to report a gift exceeding the annual exclusion.
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Thu Sep 04, 2014 6:10 pm
littleroc02us Moderator
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Yes, that is true blixet in regards to the gifting rules. My father in law gifts us 14k each year, which technically my mother in law is doing the same even though she doesn't have a clue. So in a realistic situation, so long as a married couple are sending you 14k a year and filling out the Form 709 is all that needs to be done. Plus the recipient of the gift doesn't need to be a relative.
Risk comes from not knowing what you're doing. (Warren Buffet)
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