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Tax brackets and income limits and standard deductions...
Annual gift exclusion for 2024 was increased to $18K (per individual, per beneficiary).
The same is also the annual contribution limit for 529s , although there is a 5-yr pull-forward provision that can allow 5 x 18K = $90K into 529 right away.
$18k gift exclusion for individuals. Suppose I want to gift $18k to my wife? The only account she has in her name ALONE is her Trad IRA. But..... there's no reportable earned income. She can't add to it, anyhow.
I just write her a check from our (joint) checking account? But then the IRS sees my name on it, too...
Well, now! Great news! With reference to my question above, there might be a million ways to do it; can anyone here on the board offer a simple method? To gift to my wife? She is a US citizen. (Or son, within the $18k limit?)
My own Pension, SS, gains/losses from investments are our only reportable income. She holds a T-IRA that is stinking up the world this year, worth today less than $10k. So that counts, but not for much. But no earned income by her.....So, can't dump it into her IRA.
The idea here is to reduce my own Trad. IRA and grow the (joint) brokerage, taxable side of the portfolio. Taxes are not a consideration. And I would not want to just empty-out my own IRA, because that would be way too much money added to taxable income in a single year. Don't ever want to see THAT sort of tax bill!
Is there a real thing, gift to a spouse, when they already own 1/2 of everything you do and visa-versa? It doesn't matter (I don't think) if her name alone or both of your names are on the accounts. All your money is joint.
And I don't believe you can gift IRA $ to anyone without paying taxes on the withdrawal first. You can't move taxed deferred IRA money into someone else's IRA. I'm confused on what you are trying to accomplish. There is no getting around paying taxes on IRA withdrawals.
@MikeM. @yogibearbull. On second thought, Mike is correct. It might make sense to gift my son some money. We have a joint account back in California, but he has his own individual account, too. Might I send it THERE? I understand that there will need to be taxes paid on T-IRA withdrawals. Except for the fact that our taxable income never meets the threshold. We never pay federal income tax. As long as I don't pull out too much each January from that IRA....
Also, unrelated: Month by month, in baby steps, I'm growing the joint taxable brokerage account. And some of the January annual withdrawal ends up in there, too. There are more generous INHERITED IRA rules for a spouse 10 years, or even younger, than the deceased. But what I try to teach her about all of this goes in one ear and out the other. She can get at the taxable account without worrying about ANY IRA rules, and that's what she prefers. And she has one totally crazy schedule that she keeps. I don't complain.
Is there a real thing, gift to a spouse, when they already own 1/2 of everything you do and visa-versa?
Surely you're not saying that if you have $100K in the bank on Tuesday and you get married on Wednesday, then you immediately "lose" $50K?
In California (a community property state), your get to give away half of the community property via your will, unless it is titled as community property with right of survivorship. That's a fairly new law ("Community property with Right of Survivorship is a relatively new form of owning real property, and was created by the California legislature in 2001.")
To address the original question - for tax purposes, you don't need to show that you've gifted (separate) property to your spouse, because the IRS doesn't care about that transfer. Now the state might care, because who gets that yacht when you die depends on whether you kept it as your separate property, or you gifted it to your spouse, or you and your spouse own it jointly.
If while you and your young spouse are alive you are subject to RMDs, you use Table II to compute your RMDs. This table is based on both your age and that of your spouse and results in smaller RMDs based in part on the longer life expectancy of your spouse. https://www.irs.gov/publications/p590b#en_US_2022_publink100090077
I/we have thought about a Roth conversion, but it feels like much ado about nothing. And my lawyer cousin tells me a Will is just unnecessary if we don't own any Real Estate. We have joint account everything--- and my wife's name is even on the joint account I have with my son--- her stepson. She and I have no children together.
@msf yes, you've actually stated it ACCURATELY. Thank you. That's what I meant. . She will have control over the money for longer, after I'm gone. She still has to wait until 59 and a half, I suppose, but her own spend-down can take lots longer, if she wants it that way--- compared to the 10-year rule for a non-spouse who inherits a T-IRA. (The format of those Tables is nutso goofy!!!)
Comments
The same is also the annual contribution limit for 529s , although there is a 5-yr pull-forward provision that can allow 5 x 18K = $90K into 529 right away.
Clawbacks may apply to gifts.
I just write her a check from our (joint) checking account? But then the IRS sees my name on it, too...
How might I DO this?
These rules are for nonspouses - kids, grandkids, relatives, friends, the MFO posters you like (-:).
My own Pension, SS, gains/losses from investments are our only reportable income. She holds a T-IRA that is stinking up the world this year, worth today less than $10k. So that counts, but not for much. But no earned income by her.....So, can't dump it into her IRA.
The idea here is to reduce my own Trad. IRA and grow the (joint) brokerage, taxable side of the portfolio. Taxes are not a consideration. And I would not want to just empty-out my own IRA, because that would be way too much money added to taxable income in a single year. Don't ever want to see THAT sort of tax bill!
And I don't believe you can gift IRA $ to anyone without paying taxes on the withdrawal first. You can't move taxed deferred IRA money into someone else's IRA. I'm confused on what you are trying to accomplish. There is no getting around paying taxes on IRA withdrawals.
On second thought, Mike is correct. It might make sense to gift my son some money. We have a joint account back in California, but he has his own individual account, too. Might I send it THERE? I understand that there will need to be taxes paid on T-IRA withdrawals. Except for the fact that our taxable income never meets the threshold. We never pay federal income tax. As long as I don't pull out too much each January from that IRA....
Also, unrelated: Month by month, in baby steps, I'm growing the joint taxable brokerage account. And some of the January annual withdrawal ends up in there, too. There are more generous INHERITED IRA rules for a spouse 10 years, or even younger, than the deceased. But what I try to teach her about all of this goes in one ear and out the other. She can get at the taxable account without worrying about ANY IRA rules, and that's what she prefers. And she has one totally crazy schedule that she keeps. I don't complain.
Thank you both.
Surely you're not saying that if you have $100K in the bank on Tuesday and you get married on Wednesday, then you immediately "lose" $50K?
In California (a community property state), your get to give away half of the community property via your will, unless it is titled as community property with right of survivorship. That's a fairly new law ("Community property with Right of Survivorship is a relatively new form of owning real property, and was created by the California legislature in 2001.")
In common law property states (i.e. most of them), what's yours is yours and what's your spouse's is your spouse's. Of course you can agree to own property jointly, e.g. as joint tenants or tenants in common.
https://www.wiggin.com/publication/community-property-states-versus-common-law-property-states/
To address the original question - for tax purposes, you don't need to show that you've gifted (separate) property to your spouse, because the IRS doesn't care about that transfer. Now the state might care, because who gets that yacht when you die depends on whether you kept it as your separate property, or you gifted it to your spouse, or you and your spouse own it jointly.
You may be confusing the RMD rules for a regular (as opposed to inherited) IRA. Here are the rules for spousal inherited IRAs as described by Chuck. The only place "10 years younger" appears is for IRAs inherited by someone who is not a spouse.
https://www.schwab.com/ira/inherited-and-custodial-ira/inherited-ira-withdrawal-rules
If while you and your young spouse are alive you are subject to RMDs, you use Table II to compute your RMDs. This table is based on both your age and that of your spouse and results in smaller RMDs based in part on the longer life expectancy of your spouse.
https://www.irs.gov/publications/p590b#en_US_2022_publink100090077
I/we have thought about a Roth conversion, but it feels like much ado about nothing. And my lawyer cousin tells me a Will is just unnecessary if we don't own any Real Estate. We have joint account everything--- and my wife's name is even on the joint account I have with my son--- her stepson. She and I have no children together.
She will have control over the money for longer, after I'm gone. She still has to wait until 59 and a half, I suppose, but her own spend-down can take lots longer, if she wants it that way--- compared to the 10-year rule for a non-spouse who inherits a T-IRA. (The format of those Tables is nutso goofy!!!)