What to do w/lrg physical cash gift from an elderly relative? Legal, banking & IRS implications? Best courses of action. (2024)

FAQs

What to do w/lrg physical cash gift from an elderly relative? Legal, banking & IRS implications? Best courses of action.? ›

A: Under federal law, large cash gifts are allowed, but be aware of IRS gift tax rules. Banks will report cash deposits over $10,000, so it's wise to notify your bank before making a large deposit. Ensure you have documentation regarding the origin of the gift to address any future inquiries.

Bottom Line. You can deposit a large cash inheritance in a savings account, either through a check or direct wire to your bank.

Essentially, gifts are neither taxable nor deductible on your tax return.

There is typically a tax-free gift limit to family members until a donation exceeds $15,000 (jumping up to $16,000 in 2022). In these instances, the IRS is usually uninvolved. Even then, it can just result in more paperwork. At the federal level, assets you receive as a gift are usually not taxable income.

The basic gift tax exclusion or exemption is the amount you can give each year to one person and not worry about being taxed. The gift tax exclusion limit for 2023 was $17,000, and for 2024 it's $18,000. That means anything you give under that amount is not taxable and does not have to be reported to the IRS.

If you're the one who gave the gift, you don't report it either, unless it exceeds $17,000 per recipient for 2023 ($18,000 for 2024). In that case, you'll file Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return.

To safely deposit a large amount of cash, visit a brick-and-mortar branch operated by your financial institution. Contact your financial institution if you plan to make a sizable deposit, said Christopher Naghibi, executive vice president and chief operating officer at First Foundation Bank.

A good place to deposit a large cash inheritance, at least for the short term, would be a federally insured bank or credit union. Your money won't earn much in the way of interest, but as long as you stay under the legal limits, it will be safe until you decide what to do with it.

How does the IRS know if you gift money? ›

The primary way the IRS becomes aware of gifts is when you report them on form 709. You are required to report gifts to an individual over $17,000 on this form. This is how the IRS will generally become aware of a gift. However, form 709 is not the only way the IRS will know about a gift.

If you receive a gift, you do not need to report it on your taxes. According to the IRS, a gift occurs when you give property (like money) without expecting anything in return. If you gift someone more than the annual gift tax exclusion amount ($17,000 in 2022), the giver must file Form 709 (a gift tax return).

A gift is reportable if its fair market value is $50 or more. In addition, multiple gifts totaling $50 or more received during the reporting period from a single source must be reported. It is the acceptance of a gift, not the ultimate use to which it is put, that imposes your reporting obligation.

"Include a note to the person that shows that you've given this some thought, and that there's meaning behind it," Swann says. "If they're an avid gardener or into sports, you could say, 'Here's to your next golf game,' or 'Here's a little something to help you as you expand your garden.

By setting up an irrevocable trust, donors can direct how they want the money to be managed and specify how it can be distributed and when it should be withheld, even if that happens after the donor's death.

For 2024, the annual gift tax exclusion is $18,000, meaning a person can give up to $18,000 to as many people as he or she wants without having to pay any taxes on the gifts. For example, a man could give $18,000 to each of his 10 grandchildren this year with no gift tax implications.

After using the money, I will thank them again. I would invite them to dinner at my new house I bought if I bought a house, or a ride on my boat if I bought a boat. If I invested it, I would once in a while say how much I appreciated knowing I will be able to retire someday.

The first $10,000 is not assessed as it's in the 'gifting-free area'. The other $10,000 is assessed as a deprived asset for five years from the date of the gift.