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Home > Best Laid Plans and a Money Gift Limit Question

Best Laid Plans and a Money Gift Limit Question

April 17th, 2016 at 01:05 pm

Sometimes I don't know why I bother planning for anything. Life just throws curve balls and then everything changes.

My mom needs money for major house repairs and since we still owe her $43,000.00 and she's given us a 0% interest rate all these years, I don't really feel like I should say no to the request, nor do I want to. We do have the money and the need is real. So we will be paying a lump sum of $10,000 to her this month on our loan, plus the usual $1000 monthly payment.

We have made the decision to take it out of our Emergency Fund and not out of our Down Payment Fund. In a real world emergency we'd use the DPF after the EF ran out anyway, so we consider it a back up EF for the time being, anyway. It's all semantics.

It feels disheartening, feels like a step backwards in our goals. Yet, it also means we will only have 32 payments left after this month is paid. That is 2 years and 8 months of payments left. Which puts it a lot closer, of course, to being done with.

If I knew what was happening with DH's job, because surprise, surprise, another deadline has gone by with very little progress being made, I'd probably make the decision to give her more. I mean if he got the contract. If the loan to her was reduced or gone, then it would free up a huge amount of money that we could then throw back into saving. But I'm not going to consider that until we know, because we may need that money to live on.

I actually do have enough to pay her off in full, it would just wipe out most of what is in our savings. I'm not sure we could give it all this year taxwise though. With the $12,000 per year we already pay her and the $10,000 lump sum, that'll be $22,000 this year. Isn't that the limit on what can be "given" to someone without it being income? Or can DH and I both "give" her $22,000 a year? Since it is not an official loan, we would be "gifting" it for legal reasons.

3 Responses to “Best Laid Plans and a Money Gift Limit Question”

  1. Jenn Says:

    I'm not an expert, but I think the gift maximum is $14k per person. So you and your husband would be good for $28k if needed.

    You shouldn't feel that it's a step back! You're lowering your debt and there's no negative impact on your net worth at all.

  2. AnotherReader Says:

    If you are repaying a loan, that is not a gift. Draw up some paperwork to support the loan definition and repay the loan.

    The maximum annual gift exclusion per giver is $14,000 in 2016. So you can each give your mom $14,000, for a total of $28,000. If you give more, you have to file a gift tax return (Form 709) for that year, but you do not owe taxes. Instead, the gift is credited toward the total amount exempted from estate tax, currently $5,430,000. Unless you expect your estate to exceed that amount, no tax will be due.

  3. alice4now Says:

    I know it stings to see the money gone from the account, but it is lowering your overall debt, so your net worth shouldn't change. I'm sure if your DH's job situation was more concrete you would feel better about it all. The fun of contracts!

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