I read this story and thought of this thread. Only in the NYT and cc would a “small inheritance” enable a 27yo to but a $600k home. Not being critical so don’t take offense, but, like @oldmom4896 said, most of y’all have a whole lot more money than I do. 
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$600k in NY doesn’t buy much. The down payment isn’t much, so I’d consider that a small inheritance. It is all relative though.
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Yeah, I definitely made an assumption of how much the small inheritance is. She is trading her rent for her monthly maintenance so I assumed the inheritance is most of that $600k budget. But who knows really? Agreed that half a million doesn’t get you a lot in NY, but it’s still a lot of money anyway you look at it, unless you are wealthy enough to not think it is.
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Do those who give significant gifts file 709s? Thus far, I have kept annual gifts to $15k per year (dh is not in the same camp as I am on gifting money to ds, but it’s okay because we have yours, mine, and ours money. I’m gifting out of mine).
One thing I like about paying for additional education rather than, say, a down payment on a home, is that I would be able to pay the school directly and not have to file a 709. At least that is my understanding.
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Does your state offer any tax advantage to funding a 529? If so, it might be worthwhile doing so.
I had to file a 709 for a 529 contribution and did not find the form excessively burdensome, but the form may have changed since I filed it.
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We will be filing that form this year. Gifts were over the $30,000 limit for us as a couple.
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I live in a state with no state income tax.
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For reference, see table 2 of The Fed - Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances .
29.9% of White and 10.1% of Black families received an inheritance. Those who did got a median amount of $88.5k and $85.8k respectively. (7.2% of Hispanic and 17.8% of Other families received an inheritance, of smaller median amount.)
I.e. most families have not received an inheritance at all, although many of those who did got enough for a 10% down payment on a $600k house (not the entire house, or even the 20% needed for the best rates, no PMI, and avoiding the impound / escrow for property tax payments, although it could add to the heir’s pre-existing savings to get to 20%).
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I don’t know the name of the form, it I did ask my accountant about it. I suspect there will be tax expenses, but I would do it again. He said a big gift should be done in one year, so only one form.
Actually, there is no tax expense now. This gift amount is part of what your total gift amount upon death is…so…it’s really just the added job of filling out that form now.
@BelknapPoint did I explain that clearly?
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Mostly. For an individual, any gift that exceeds the annual gift tax exclusion amount ($15k for 2021, increasing to $16k next year) will apply to the lifetime gift tax exemption amount, which is $11.7 million this year. Only non-excluded gifts that were given this year after the $11.7 million lifetime exemption was reached will actually incur a tax bill. Before reaching the lifetime exemption amount, non-excluded gifts are reported on Form 709 (Gift Tax Return) for reporting purposes, so that accumulation of such gifts can be tracked on the way to reaching the lifetime exemption amount.
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Hi team. New to the group, and wow, there’s so much to catch up.
Speaking of gifts, wanted to chime in a little celebratory note that now that our S19 is a junior, we (and family members) can give freely without impacting his FAFSA lookback.
We are fans of the 'Family Roth Match", where if a kid/young adult has earned income and chooses to invest some in a RothIRA, it will be matched (up to the eligible amount).
Parents and Grandparents this Christmas know how much he earned and invested, and he can get the family contributions as gifts this year.
Anyone else heard of/doing this?
ETA:
Oh, sorry. And by way of introduction in response to the OP:
Our annual expenses are around $45k with 2 kids. We will use that as a base target for retirement expenses also. So we think we will need a total of around $900,000 in today’s dollars, since our portfolio holds a SWR over 6% on a couple different Monte Carlo simulators. Age will be determined by hitting that magic number. We have no pensions, and a small SS expectation.
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We were able to “ gift” our kids a large amount this year because we disclaimed DH’s inheritance from his mother. This was a way to avoid generation skipping tax for her or gift filing for us.
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I agree that this is an excellent option to utilize.
And, I believe that it isn’t an all or nothing proposition, correct? A portion of inheritance can be disclaimed? E.g., if one were inheriting $100 from someone, $20 of that could be disclaimed, but $80 retained.
Yep! You can partially disclaim.
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Congrats on getting near end of the college expenses.
Per your retirement income estimates, you’ll want to factor in income tax (ie your target would be post-tax), which maybe you already did. Also you may need to pay more for medical insurance, especially if you retire before Medicare age.
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Yes. Taxes must be considered. With MFJ, tax would be ~$2k, possibly less based on withdrawal strategy. We plan to pay $0 by keeping taxable income under the exemption for as long as we can.
We use ACA now, and prob would continue, especially with so low income. But need to find a gap plan or hope for an expansion to cover out of state medical events, as we like to travel.
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Regarding disclaimed inheritance, one would need to know the deceased’s will.
If my father passes and I disclaim, I suspect my portion is per stirpes or but if it reverts back to my siblings, my disclaiming does not help my kids.
Also not sure where my unmarried, childfree sib’s disclaimed portion goes.
The will could state that any disclaimed portions go to an animal rescue organization.
I discussed disclaiming with my FA. His take was to accept and then gift to assure my kids got my portion. One can only control the distribution of what one accepts.
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@professionaldad on a couple of years when DDs were earning a little money and we had ‘extra’, we just put what they had earned into a Roth IRA. Having that account was helpful as one of our DDs switched jobs from working for the State and had a retirement sum to roll over. She set up a TD Ameritrade IRA to receive the funds, then rolled it into her Roth IRA. She can afford the taxes on the Roth conversion, and she has lots of years to let it grow. I was the ‘consultant’ who helped invest into varying ETFs and am watching it.
I am concerned about DDs entering the housing market. One is spending a lot on travel and other things. The other has 3 children in first 4 years of marriage.
We will find out if DD’s family of 5 will be remaining in their area after March.
DH and I got into our first home 26 months after graduating with UG - much less home in what we had in first 3 homes in 3 different cities (employer paid closing and moving costs). We built our home we have lived in since 1992.
So far, we have done the same for one as we have done for the other. They are 26 months apart in age.
I want to downsize but not stay where we are - while DH wants to stay where we are. I am struggling with use of funds for current home’s improvements to prepare for sale at top dollar, and how to best utilize funds for any ‘help’ with home ownership for DDs. DH and I need to come to agreement.
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We are trying to work on various things in retirement, including the legal documents we should have in place, and coordinating with our finances.
The book “Wills, Estates, and trusts” - I just purchased the 4th edition of this book by two lawyers Alexander Bove and Melissa Langa. I am starting with the glossary that goes from Abatement to Unified Credit. Covers many topics of interest and explains in a clear way. I feel like a few nuggets makes it a worthwhile purchase. Anything you know before meeting with professionals can have time saved and also asking intelligent questions.
We have 3 weddings (over 3 consecutive weekends) in 2022, and one other out of state trip for niece to become a commander of an air force base. So that probably is the extent of our travel.
The grand children are 100 miles away from us, and we can see them when it works for them. Plan to perhaps take a flight to other daughter’s over a long weekend for a girls get together, and maybe some familiarity with the housing market there.
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