[USER]

Gifts vs. Loans… my in-laws are gifting us about 45-50k after the sale of their parent’s home.

They are wanting us to sign a document/promissory note which states that it’s a loan with interest and the maturity date is 10 years from now.

When it was initially presented to us, they said that it was for tax purposes at the guidance of their advisor and that it would not have to be paid back and would be forgiven upon their death.

There is nothing in the note stating that it would be forgiven upon their death and we are concerned that other family members may challenge us in the future when they pass and ask that we pay this “gift” plus interest.

Are we missing something?

I tried looking up gift tax exemptions, etc.

and I don’t believe they have close to the 13 million or will gift close to that in their lifetime.

We trust my spouse’s parents but want to make sure they are getting the right guidance.

Thank you in advance.

[Sarah]

Giving someone a lump sum gift of $50k would require them to file with the IRS since it’s over the $18k annual exclusion for gift taxes.

They can totally get around this and give it as a true gift without paying taxes or getting any accountants/lawyers/IRS involved.

Here’s how:

So your mother and father in law can EACH give you AND your spouse up to $18k per year (in 2024; this amount usually increases each year), so here’s what they would do.

Mom gives you gift of up to $18k

Dad gives you gift of up to $18k

Mom gives your spouse gift of up to $18k

Dad gives your spouse a gift of up to $18k

4 separate checks to and from the right parties and you’re all good in the eyes of the IRS.

And they could even give you up to $72k if they did the full amount.

No need for anyone to even report it on their taxes.

No need for signed letters.

No need for any of your relatives to be aware. Just a simple gift.

Honestly they have a pretty bad accountant if they didn’t think of this…

or maybe their intention is that want you on the hook to eventually pay back the money if needed

[Scott]

If you sign that note you’ve executed a contract. It’s a loan with interest.

[Giz]

if it’s in writing that will be black and white. I would get a clause in that note to protect you.

otherwise, it sounds like a loan to me.

[Heather]

Why wouldn’t they just do it as a gift? Each parent could give each of you $15k (or whatever the limit is these days).

[Ralph]

They can gift you any amount. If over the 17 yearly limit, the gifter has to fill out a tax form so that is it recorded against the 11M lifetime or whatever that is now.

[Ashley]

I would expect an advisor to be more familiar with this.

[Author]

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