stock inheritance and tax


N

NBFDsta3

let say my parent died and left my children and myself
stock. What are the tax issues for my children if i were to
give my portion to them also. Say if i got 1000 shares and
wanted to split that up and give it to my children on top of
what they already recieved. I might add that the original
will stated they were to get 1000 shares but a revokable
trust lowered that substantially and I want them to have
what was rightfully theirs per my parents wishes. Question
is: can I give my children this stock that rightfully
belongs to them?
 
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S

Stuart A. Bronstein

let say my parent died and left my children and myself
stock. What are the tax issues for my children if i were to
give my portion to them also. Say if i got 1000 shares and
wanted to split that up and give it to my children on top of
what they already recieved. I might add that the original
will stated they were to get 1000 shares but a revokable
trust lowered that substantially and I want them to have
what was rightfully theirs per my parents wishes. Question
is: can I give my children this stock that rightfully
belongs to them?
You can certainly give them stock. The problem is, what are
the consequences?

And it depends on several things. How much money is
involved? If the value of what you want to transfer is less
than $11,000 per child (plus any other gifts you may make to
each child during the tax year), you're safe to pretty much
do what you want.

If the value is greater than that, you would have to act
within nine months of the date of death. You execute a
document called a qualified disclaimer of the amount of
stock you want to go to your kids. It will then go to them
as if you had died before they your parent. So if you have
one child you want to have more or less than the others, a
disclaimer won't work, because they'll all probably have to
share equally.

Stu
 
B

Bill

NBFDsta3 said:
let say my parent died and left my children
and myself stock. What are the tax issues for
my children if i were to give my portion to them
also. Say if i got 1000 shares and wanted to
split that up and give it to my children on top of
what they already recieved. I might add that
the original will stated they were to get 1000
shares but a revokable trust lowered that
substantially and I want them to have what
was rightfully theirs per my parents wishes.
Question is: can I give my children this stock
that rightfully belongs to them?
Of course you can give it to them. The issue is, can you
give it to them without any tax complications?

And the answer is: It depends on the value of the stock.
If the gift is $11,000 or less, then there is _no tax
consequence. If it is more, then it may be split into
separate "chunks" and gifted over whatever number of years
it takes to keep the annual amount to $11,000 or less.

Bill
 
D

David Woods, EA, ChFC, CLU

NBFDsta3 said:
let say my parent died and left my children and myself
stock. What are the tax issues for my children if i were to
give my portion to them also. Say if i got 1000 shares and
wanted to split that up and give it to my children on top of
what they already recieved. I might add that the original
will stated they were to get 1000 shares but a revokable
trust lowered that substantially and I want them to have
what was rightfully theirs per my parents wishes. Question
is: can I give my children this stock that rightfully
belongs to them?
You're asking a legal question not a tax question. Whether
you can give something or not is a matter of law not tax.
 
A

A.G. Kalman

NBFDsta3 said:
let say my parent died and left my children and myself
stock. What are the tax issues for my children if i were to
give my portion to them also. Say if i got 1000 shares and
wanted to split that up and give it to my children on top of
what they already recieved. I might add that the original
will stated they were to get 1000 shares but a revokable
trust lowered that substantially and I want them to have
what was rightfully theirs per my parents wishes. Question
is: can I give my children this stock that rightfully
belongs to them?
You may gift annually to each of your children up to $11,000
without having to file a gift tax return. You did not tell
us what the stock was worth nor did you tell us how many
children you had. Hopefully, the $11,000 per child will
keep you under the limit. The $11,000 is computed using the
fair market value (FMV) on the day you make the gift. If the
amount per child exceeds $11,000 you have to file a gift tax
return. Any excess over $11,000 per child would be
subtracted from your lifetime $1,000,000 exemption. To
avoid this, you could spread the gifts out over more than
one year.

You didn't ask, but here is how your children would figure
their cost basis.

Your cost basis in the stock is the FMV on your parent's
date of death or the alternative date if so chosen by the
estate administrator. Your cost basis in the stock would
transfer to the child unless at the time of your gift the
FMV of the stock was less than your basis. In this instance,
the children would either use your cost basis if they sell
at a gain or the FMV on the date of the gift if they sell at
a loss.
 
H

Herb Smith

NBFDsta3 said:
let say my parent died and left my children and myself
stock. What are the tax issues for my children if i were to
give my portion to them also. Say if i got 1000 shares and
wanted to split that up and give it to my children on top of
what they already recieved. I might add that the original
will stated they were to get 1000 shares but a revokable
trust lowered that substantially and I want them to have
what was rightfully theirs per my parents wishes. Question
is: can I give my children this stock that rightfully
belongs to them?
Your parent's wishes are reflected in the trust
instructions, the "original will" no longer applies, it has
been re[laced.

If you gift your shares to the children, they will receive
your cost basis in the shares -- likely the date of death
FMV of the stock. If they sell those shares in the future,
they will owe tax on any future appreciation, but don't owe
tax on the gift.

If you gift a total value of $11,000 or more per child in a
given year YOU will be required to file form 709 to report
the "taxable" gift. Likely there will be no tax due
immediately, but your lifetime gift limit of $1,000,000 may
be reduced a bit.

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L

Lanny Williams, CPA

NBFDsta3 said:
let say my parent died and left my children and myself
stock. What are the tax issues for my children if i were to
give my portion to them also. Say if i got 1000 shares and
wanted to split that up and give it to my children on top of
what they already recieved. I might add that the original
will stated they were to get 1000 shares but a revokable
trust lowered that substantially and I want them to have
what was rightfully theirs per my parents wishes. Question
is: can I give my children this stock that rightfully
belongs to them?
Other posts seem to have covered the questions regarding
immediate tax consequences of giving the stock to the
children. But, nobody seems to have addresses the question
of advisability.

And, there are some serious considerations about the
advisability. If you put the stock in a child's name, you
cannot use the money from a sale of the stock to pay for
anything that would be considered a "parental oblication."
Since parental obligations vary widely from state to state,
that cannot be addressed in any detail here.

In addition, at some future time, when the child may apply
for financial aid at college, the rules are less favorable
to the child's own assets as compared to the parents'.

In other words, the old fashioned, conventional wisdom is
not necessarily the best thing. Once you have given the
stock to the children, it is too late to avoid any
unfavorable consequences.

My philosophy has always been that, if something only works
because of the tax impact, it is probably the wrong thing to
do. There are too many other factors, some of them
non-monetary, that need to be considered.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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N

NBFDsta3

Thanks for the imput..... Any and all is appreciated. I
think the easiest thing would be to sell it off and give
them the cash, if they were ok with that. the stock is
currently valued at $60 per share + or - .... I would like
to give them at least 1/2 or 500 shares.... for now. that is
obviously more than $11000, so what would be the tax burden
on my chilren at 500 shares? How about cashing in and giving
them the cash. The basis at the time of death was $56 + or
-........ The issue of it being in the will and the
revokable trust is in fact a legal issue and I will look
into that.....

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J

JoeTaxpayer

You're asking a legal question not a tax question. Whether
you can give something or not is a matter of law not tax.
David, I suspect he's asking about the tax implications.
Legally, (moving money out of the country or giving to
aliens aside) you can give something that's yours to someone
else, just a question of the taxes due, if any.

Since he doesn't state the dollar value, I'd point him
toward the $11K per person gift exclusion, $22K (for each
child) if his wife counts as a giver. And the tax basis when
he received the stock gets bumped to the value at death.

Sounds like he has no issue, unless the stock was very high
priced.

JOE

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S

Stuart A. Bronstein

<< General Disclaimer: >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< It cannot be used by any taxpayer for the purpose of >>
<< avoiding penalties that may be imposed on the taxpayer. >>
<< ======================================================= >>

JoeTaxpayer said:
Since he doesn't state the dollar value, I'd point him
toward the $11K per person gift exclusion, $22K (for each
child) if his wife counts as a giver.
Since it's an inheritance, apparently left to him and not
his spouse, his wife can only be counted as a giver if they
file an election to have it treated that way.

Stu

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