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The max per year you can donate is $13,000 per family member per year, it's not unlimited. Incidents where one donates 5 years of "Tax Free" transfers at once (which is possible normally) after getting a death sentence has never flown father then a judges bench before ruling for the IRS. It's pretty classic tax fraud.
That is pretty easy to go after from filings from the executor and the families tax returns, they go through with a fine toothed comb when no third parties are involved, and tax fraud just gets your 5 kids into federal pound-you-in-the-rear prison. Great way to care for the grandkids from there, assuming the spouse didn't know and can keep them.
Interesting.
I don't know if they'd be in prison (at least not after an endless series of appeals) but that $13,000 donation limit is news to me.
I don't know if they'd be in prison (at least not after an endless series of appeals) but that $13,000 donation limit is news to me.
A person can donate on Dec 30 $13K to a husband and $13k to wife which would be $26k. Jan 2 repeat step 1 above for a total of $52k in 1 weeks time but in 2 different years. You could also give each kid the same amount if you'd like to give it to the kids.
Debt does not automatically go to the kids. If he has assets they can be sold to pay off debt but if he has no assets his estate has no money to pay the lenders and they are SOL.
A person can donate on Dec 30 $13K to a husband and $13k to wife which would be $26k. Jan 2 repeat step 1 above for a total of $52k in 1 weeks time but in 2 different years. You could also give each kid the same amount if you'd like to give it to the kids.
Debt does not automatically go to the kids. If he has assets they can be sold to pay off debt but if he has no assets his estate has no money to pay the lenders and they are SOL.
Hmm, it gets more interesting.
That's what I thought about the credit card company - they'd have to "eat" his end-of-life expenses.
Yes, they are both hypothetical, but could be real. Are both unethical...probably yes. Is that also the risk the creditors (credit card owners) put forth? Yes. So they are both at fault. You also loan money at a risk and account for that risk that someone won't pay it back. That is also why there are credit limits and they equate their risk among individuals.
When my MIL finally passed away we received a credit card in the mail with the name "Estate of *****" with a $2000 limit I thought briefly that we kids should go ahead and have a $2000 party on her or buy a big screen TV as her last gift to us for putting up with her.
How stupid is it to issue a credit card to a dead womans estate who died completely broke ? We cut up the card but I was tempted.
The max per year you can donate is $13,000 per family member per year, it's not unlimited. Incidents where one donates 5 years of "Tax Free" transfers at once (which is possible normally) after getting a death sentence has never flown father then a judges bench before ruling for the IRS. It's pretty classic tax fraud.
That is pretty easy to go after from filings from the executor and the families tax returns, they go through with a fine toothed comb when no third parties are involved, and tax fraud just gets your 5 kids into federal pound-you-in-the-rear prison. Great way to care for the grandkids from there, assuming the spouse didn't know and can keep them.
$13,000 per person per year is the annual exemption for gift tax. There is nothing that prevents someone from giving away far more than that every year. Amounts over $13k per year are subject to gift tax, but the tax liability is the donor's, not the recipients'. So no, there's no "tax fraud," and no PMITA prison waiting for the kids, certainly not with this amount, because there won't be any gift tax due unless the total of taxable gifts reaches $1 million.
What might be an issue are state laws governing fraudulent conveyance of assets. People facing insolvency can't just transfer their remaining assets away to keep creditors from getting them. The creditors might try to go after the kids with the threat that they were involved in a scheme to defraud them, but there's no guarantee the kids would be liable.
Last edited by Naptowner; 01-05-2010 at 07:36 PM..
If he sets up his estate correctly there will be no tax burden to the heirs. His action to max out credit cards and he happens to die - who knows he committed fraud? You or I could go on holiday and max out our cards and die while on vacation. While the former was premeditated but who really knows for sure? It could be assumed things in life happen. Sure it's unethical but isn't it like the tree that falls in the forest - did it make a noise?
In this case, it would be very easy to see that the guy committed fraud. The guy received a terminal diagnosis from his doctor and then went on the spending spree right up until the time he passed away. That is absolutely nothing like going on vacation and dying of accidental causes. Completely apples to oranges here and a very obvious fraud case in the first scenario.
<shrug> so he takes out the credit card "insurance" that pays off the debt in the event of his death.
The whole hypothetical is silly anyway, we all know the medical community would get every last dime and then some anyway. Who is to say that a test wasn't performed when the patient can't complain about the overbilling?
FWIW, the idea has been around for ages. It used to be couched as "You buy a number of cars on credit, one for each offspring. You then take out the insurance policy that pays off the loan if you die. Those policies have no physicals or pre-qualifiers."
All any of this amounts to is taking advantage of poorly worded contracts. Businesses and people do that all the time and get away with it.
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