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Lottery win question

Topic closed. 15 replies. Last post 4 years ago by Clubpulse1.

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Artemis's avatar - Alice
New England
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Posted: June 29, 2013, 9:16 am - IP Logged

If I won a few million, and decided to buy one house for my sister, one for my father, and one for another random family member, how would that work?

Could I just put it in the persons name when buying it? Also, would they have to pay some sort of gift tax?

    Romancandle's avatar - moon
    Upacreek
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    Posted: June 29, 2013, 2:49 pm - IP Logged

    I've wondered about that too... if you're talking just a few million, I think the lifetime cap on gift taxes is 5.25 million, so, no they wouldn't have to pay a gift tax, but you'd need to file the transaction with uncle sam.

    But I don't know jack about this sort of stuff... estate planning and taxes are complicated stuff.

    I don't think you could put the property in that pereson's name, but you could transfer it to them through some sort of legal instrument after you bought it.

    -RC

      maringoman's avatar - images q=tbn:ANd9GcTbRxpKQmOfcCoUqF2FyqIOAwDo7rg9G-lfJLAALPGWJWwiz19eRw
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      Posted: June 29, 2013, 4:40 pm - IP Logged

      http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes

      You would pay the taxes on any gift to anybody other than your spouse.

      That money's gone fo ever

        Romancandle's avatar - moon
        Upacreek
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        Posted: June 29, 2013, 6:13 pm - IP Logged

        http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes

        You would pay the taxes on any gift to anybody other than your spouse.

        Useful link maringoman... if I'm reading this correctly, you can give away up to 14K annually to "anyone" (family, friends, etc.) without paying a gift tax.  If you're married its twice that (28K- you and your spouse).

        I think I mixed apples and oranges with the 5.25 million lifetime cap though in reference to my first response...

        So to answer Artemis's question... anything beyond 14K annually would trigger the gift tax correct?  For simplicity sake... 100K house... 86K gift tax hit Y/N?  And Artemis would be hit with that tax Y/N

        Wonder what the tax rate is in that circumstance... 28%?... 24K?

        -RC

          mikeintexas's avatar - tx avatar-1.gif
          Texas Panhandle
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          Posted: June 29, 2013, 7:00 pm - IP Logged

          I've thought about this a lot and done a little research.  Any outright gift is subject to the limits mentioned in the above posts.  I'd consult a lawyer, but what you COULD do is buy the homes and finance them, either yourself or through the bank.  I'd think there would be some tax benefits to that, plus you could charge them up to that $14 k/yr. ($28k if you're married, counting your spouse's gift) until the house was paid off.

          I'm sure it's changed some now, but when I was growing up my dad's company supplied our house on the oil lease where pop worked. They charged him ten bucks/month and dad said it was for tax purposes.  They also paid the electricity & phone (a party line) and we had our own water well and the gas came off the lease through our own scrubber.  Dad didn't make a lot of money per hour, but those "freebies" were probably worth at least a thousand bucks/month in today's money.


          A people that elect corrupt politicians, impostors, thieves and traitors are not victims...but accomplices.
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            Posted: June 29, 2013, 7:56 pm - IP Logged

            I've thought about this a lot and done a little research.  Any outright gift is subject to the limits mentioned in the above posts.  I'd consult a lawyer, but what you COULD do is buy the homes and finance them, either yourself or through the bank.  I'd think there would be some tax benefits to that, plus you could charge them up to that $14 k/yr. ($28k if you're married, counting your spouse's gift) until the house was paid off.

            I'm sure it's changed some now, but when I was growing up my dad's company supplied our house on the oil lease where pop worked. They charged him ten bucks/month and dad said it was for tax purposes.  They also paid the electricity & phone (a party line) and we had our own water well and the gas came off the lease through our own scrubber.  Dad didn't make a lot of money per hour, but those "freebies" were probably worth at least a thousand bucks/month in today's money.

            That's interesting....Im wondering this....put a decent downpayment on the house you finance it thru bank credit union whatever but you put the total balance in some kind of direct payment account ( only you have access to) so that they are never late on monthly payments and it will help boost their credit rating and they can take the intrest payments off on their taxes.....is that even possible??

              mikeintexas's avatar - tx avatar-1.gif
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              Posted: June 29, 2013, 9:17 pm - IP Logged

              I think that's doable, too.  I once borrowed some money for a car using a CD as collateral and didn't have to pay any interest and didn't have any set monthly payments.  I guess since the CD was w/ the bank was why the easy terms.

              I see people in here and in other forums talking about what they'd do f/ their family and most don't realize there's a limit w/out having to pay taxes.  I dunno 'bout you, but if I had won 100 million and had to pay 39.6 million in taxes, I would be loathe to pay any more, esp. for being generous to my own family.  I have done a little more research about starting businesses and I *think* there's nothing hard and fast about what you can pay an employee, even if they're your own family.  (I'd still want to keep it at a reasonable amt. just to keep the IRS from sniffing around)  There are even advantages to hiring kinfolk; one thing I discovered was that you don't have to pay unemployment insurance on family members.   I don't know if it's changed since I last read this, but I'm fairly certain the IRS lets you declare a loss on a business for three years, so I'm thinkin' there's even more tax advantages to having a family business. Me?  I'd be happy to have a book store in some out-of-the-way location w/ TV and internet, wouldn't really mind if I didn't have a customer all day.

                garyo1954's avatar - garyo
                Dallas, Texas
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                Posted: June 29, 2013, 9:51 pm - IP Logged

                If I won a few million, and decided to buy one house for my sister, one for my father, and one for another random family member, how would that work?

                Could I just put it in the persons name when buying it? Also, would they have to pay some sort of gift tax?

                In Texas this is known as a "Ladybird contract," named after First Lady, Ladybird Johnson.

                She was known for giving property away and what she would do is get the loan on the property and have a contract drawn up that stipulated:

                1) once all payments were made on the property it belonged to the third party (who she bought it for)

                2) they were responsible for all maintenance and upkeep

                3) they would pay all insurance and taxes

                This contract would then be filed with the deed in the courthouse. Once the property was paid off, the deed would be released to the new owner (the person named in the attached contract). 

                Can't remember the exact details but for some odd reason one of these contrcts made its way into court. As some lengthy trial, it was upheld that the contract was legal and the property did indeed belong to the person named in the contract and no one else had claim to it. (Ladybird Johnson had passed away by this time and couldn't make her wishes known to the court).

                Your state probably has something similar.

                In your case, it might be best to set up an account for automatically paying the note. It doesn't matter who pays the note, as long as the propery is titled to you, you get tax breaks, even if they pay the notes. With the good, comes the bad. As long as the property is deeded in your name, you will get the tax bill. (Reason for #3).

                Don't get me lying, but if no one contests the ownership, or the conditions of the contract, once the house is paid for it will be deeded to the person in the contract (at least in Texas).

                Since laws are different from state to state, you need to discuss this with an attorney in your area.

                My greatest accomplishment is teaching cats about Vienna Sausage. When I need a friend, all I need do is walk outside, pop open a can, and every little critter in the neighborhood drops by to say "Hi!"

                  Teddi's avatar - Lottery-008.jpg

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                  Posted: July 1, 2013, 8:01 am - IP Logged

                  If I won a few million, and decided to buy one house for my sister, one for my father, and one for another random family member, how would that work?

                  Could I just put it in the persons name when buying it? Also, would they have to pay some sort of gift tax?

                  Artemis, you are allowed to give $14,000 per year (whether in cash or real estate or anything else) to any individual person without having to worry about taxes. You also have a lifetime gift tax exclusion amount of $5.25M that you can give away to anyone that the $14K does not affect.

                  Let's say you bought each of those 3 family members a house valued at $1M each, for the rest of your life and even after your death, you could not give away more than $2.25M to anyone without paying the gift tax on it unless that gift is valued under $14k.

                  If you started a business, hired your family/friends and paid them significantly more than your other workers were getting paid for the same job or more than the market allows, the IRS considers that a gift. If you give them a loan and don't charge interest, that is considered a gift (there's actually an interest rate you have to charge so it's not considered a gift). If you want to pay for the medical bills of someone, you have to pay the medical facility directly; not give it to the person to pay the bills themselves or it becomes a gift. 

                  Whether you give your family cash, so they can buy whatever house they want, or you buy the house for them, when it comes to your gift tax, the result is still the same. You can buy the houses, keep them in your name, and have them live there. But unless you are living there with them, they are required to pay rent or it will be considered a gift anyway. 

                  Report all gifts valued at $14,000.01 or more on form 709 and it's due the same day your tax return is. Once you win the lottery, you NEED to fill that form out and fill it out honestly, because they are watching out for those that do not. As a lottery winner, you're automatically red flagged anyway. 

                  Always remember, you become the IRS' b*tch when you win the lottery. 

                    Avatar
                    Inland Empire
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                    Posted: July 1, 2013, 12:09 pm - IP Logged

                     I thought that you can file a multiple winner form?

                      dallascowboyfan's avatar - tiana the-princess-and-the-frog.jpg
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                      Posted: July 2, 2013, 9:23 am - IP Logged

                      Artemis, you are allowed to give $14,000 per year (whether in cash or real estate or anything else) to any individual person without having to worry about taxes. You also have a lifetime gift tax exclusion amount of $5.25M that you can give away to anyone that the $14K does not affect.

                      Let's say you bought each of those 3 family members a house valued at $1M each, for the rest of your life and even after your death, you could not give away more than $2.25M to anyone without paying the gift tax on it unless that gift is valued under $14k.

                      If you started a business, hired your family/friends and paid them significantly more than your other workers were getting paid for the same job or more than the market allows, the IRS considers that a gift. If you give them a loan and don't charge interest, that is considered a gift (there's actually an interest rate you have to charge so it's not considered a gift). If you want to pay for the medical bills of someone, you have to pay the medical facility directly; not give it to the person to pay the bills themselves or it becomes a gift. 

                      Whether you give your family cash, so they can buy whatever house they want, or you buy the house for them, when it comes to your gift tax, the result is still the same. You can buy the houses, keep them in your name, and have them live there. But unless you are living there with them, they are required to pay rent or it will be considered a gift anyway. 

                      Report all gifts valued at $14,000.01 or more on form 709 and it's due the same day your tax return is. Once you win the lottery, you NEED to fill that form out and fill it out honestly, because they are watching out for those that do not. As a lottery winner, you're automatically red flagged anyway. 

                      Always remember, you become the IRS' b*tch when you win the lottery. 

                      Good info TeddiThumbs Up

                      I Love Pink & Green 1908

                        Avatar
                        Kentucky
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                        Posted: July 2, 2013, 11:40 am - IP Logged

                        http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes

                        You would pay the taxes on any gift to anybody other than your spouse.

                        "What can be excluded from gifts? The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

                        1. Gifts that are not more than the annual exclusion for the calendar year.
                        2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
                        3. Gifts to your spouse.
                        4. Gifts to a political organization for its use.

                        In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made."

                        We can't buy a house for our parents, children, or siblings, but can contribute the same amount to a Political Action Committee without paying gift tax. I wonder who came up with that idea?

                          Jon D's avatar - calotterylogo
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                          Posted: July 2, 2013, 3:43 pm - IP Logged

                          "What can be excluded from gifts? The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

                          1. Gifts that are not more than the annual exclusion for the calendar year.
                          2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
                          3. Gifts to your spouse.
                          4. Gifts to a political organization for its use.

                          In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made."

                          We can't buy a house for our parents, children, or siblings, but can contribute the same amount to a Political Action Committee without paying gift tax. I wonder who came up with that idea?

                          We can't buy a house for our parents, children, or siblings, but can contribute the same amount to a Political Action Committee without paying gift tax. I wonder who came up with that idea?

                          Yep. Super PACs are a racket. You can set up a PAC, contribute unlimited monies to it, then have your benificiary work as an employee of the PAC and get paid a fat salary from it.

                            joshuacloak's avatar - Money Swim-uncle-scrooge-mcduck-35997717-677-518.jpg

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                            Posted: July 2, 2013, 6:12 pm - IP Logged

                            trust is always correct path

                            and must simple, can write it however u like really

                            just find a trust lawyer, tell him what u want to give,and let him claim ticket for trust/handle ever thing

                             

                            if u want to help family that is................

                             if u have kids or other family u want 2 give big gifts 2,  u want a trust,

                            its simple and defeats gift tax with a bitchslap

                            Dont ever use that 5 million ish lifetime gift tax exclusion amount for any thing, use the trust....................

                            u want to save that for your unborn grandkids etc

                            there stupid stuff like generation skipping taxes"only really rich people who have muti millions in trust have these kinds of  issue"

                            so thats why u never hear about them taxes, dems have taxes u never even knew about on the books

                                save that lifetime  gift tax free limit for future family needs is my point.

                            use the trust for a big lottery win,    and if u don't care, don't use a trust, tons of other options people have talked about

                            i just really don't want people to waste that lifetime gift tax exclusion amount , when a trust could of got around gift tax's and saved your lifetime for future needs when a trust is not a option

                             

                            this is like 100th topic on what if i won big,and how taxes effect it, searching a good idea on this topic

                            No bees, no honey.

                              helpmewin's avatar - dandy
                              u$a
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                              Posted: July 2, 2013, 8:11 pm - IP Logged

                              If I won a few million, and decided to buy one house for my sister, one for my father, and one for another random family member, how would that work?

                              Could I just put it in the persons name when buying it? Also, would they have to pay some sort of gift tax?

                              maybe you should just give them the money and they can buy the house they want