for a second I thought you were Klayman and I was wondering wtf happened!
Good for you! If I count housing equity I am there. but I am still holding for the future date when non-housing assets get me there.
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I updated my projection for YE balances…I hit 4M in 5 years with the home equity (assuming 5% returns). Kinda crazy to think I might be further from the start of COVID than I am being able to walk away.
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That would be pretty sad, indeed. Retiring with 1.5M and losing 1/3 of it in less than a year!
No, I finished the year with 1.78M excluding the home and 2.12M with and I’m up 13K so far this year.
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Reached the $1 million mark in gifts to our four children in December.
The funds were earmarked to help them with housing purchases but sadly it did not go far in the expensive housing markets of Vancouver and London. $1 million does not go far when it is split four ways. It did help them to buy modest condos and townhouses but unlikely any of them will ever own a detached home until after we no longer own ours. No plans to sell our home as we host a lot of short and long term guests.
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Giving away $1 million is notable.
Looking at the earlier posts from others there should be quite a few people here able to do that after they have retired. However our rules on gifting may be more restrictive than Canada’s?
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18k is the gift tax limit in the US. Parents can give their married children 4x that amount (each parent writes a check to each of the child/spouse).
18k per year. Married givers are a single unit, so only two checks are needed, not four. If the recipients have a joint account then one check made payable to both is fine.
But yeah one married couple can gift another married couple $72,000 per year without triggering gift tax issues in the U.S. If done December 31 & January 1 then potentially $144,000 within two days.
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The UK has some odd rules about this. Not sure if Canada is the same.
Gifts here are up to IHT threshold (£325k) in ££ as long as you live for 7 years after you make the transfer. If you die before those 7 years then tax is due.
So you can gift £325k today and pay no tax as long as you live for 7 more years.
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No such thing as gift taxes in Canada so you could give the kids millions of dollars if you had the funds.
No inheritance taxes paid by the kids either.
Income tax is, of course, paid by the owner on any asset that is subject to income tax on its deemed disposition. If my equities were sold or given in kind to the kids than I would pay any capital gain that resulted when I gave them the gift. Primary residence is exempt from capital gains in Canada.
There is a small probate fee that varies by province on the value of any part of an estate subject to probate. Quite often probate is unnecessary.
That’s interesting. Is there a free step up on the basis if you gift them appreciated stock?
Example: you have $1M in stock that you originally paid $500k for. If you give the kids the shares of stock, when they sell them later is the capital gain based on the value when they received it or your original cost basis of $500k?
When I give my kids stock valued at $1million I would pay capital gains tax at that time on that value. That $1 million then becomes their cost base for the stock when they eventually sell it.
There is different tax treatment for spouses on death. There is a deferral of capital gains tax when a spouse dies and the equities are passed to the spouse. However tax is ultimately payable on the original value of the stock when it is eventually sold.
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That’s more logical than the U.S. system.
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The step up in basis on death is the single stupidest tax law we have that overwhelmingly favors the very wealthy.
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Wow. I did not know that was a feature of the US tax system. What a huge benefit for rich folks. Struggling with the logic though.
What if you just never told the government that your parent died? You just bury them and take their money. Will you ever get caught for not paying taxes? How do people even know you’re supposed to pay taxes on inheritance? I only know this because I just read what you guys were talking about and looked it up. I bet plenty of poor people do inheritance informally since they don’t have the funds for lawyers or whatever.
And who the hell are you supposed to inform if someone dies? It’s not like I deal with this situation on a daily basis. I feel like there’s plenty of room for mistakes, and I bet there’s plenty of dead people the government simply doesn’t have records of.
Am fairly certain social security in the US would care if you never told them your parent died.
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They would if they found out. But it’s not like there are government workers knocking on people’s doors to check if they are still alive. That makes me wonder how much fraud is going on.
Don’t know the rate in the US (one for @meep) but in the UK its usually less than 1%. Pensioners in the UK usually lie much more about their actual savings and income, in order to access additional welfare benefits for the retired.
I guess there’s fraud and all but I’m actually more interested in the dead person logistics/data tracking. I am so clueless as to how to handle the situation. Do you just call the cops? The hospital? Your local city hall and you say something like “excuse me sir, my parent died, what am I supposed to do?”
I mean that’s assuming your first instinct is to call someone to ask what to do. I bet a lot of people just bury their parent in their backyard because the first thing that pops into their mind isn’t government-related.
If you live in the rural 'po…sure.
Pretty much impossible in any urban area, unless you like having your dead parent in popsicle format inside your second fridge.
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