Gift Funds Received after Discharge

[InTheMiddle]

Chapter 7 filed October 1, 2010
Trustee meeting November 15, 2010
Received Discharge Feb 22, 2011
Filed alone - (husband did not file)

Question 1:
It is now 7/1/2011 and my husband is facing major surgery and we have no health insurance. Medical bills will be close to $100K when it is all said and done. Friends are raising funds for us to help defer the cost. I remember something being said about inheritance, gifts or windfall after six months? Is that from filing date? Or does the clock run from discharge date? Or would it even matter in this situation. Just concerned that Trustee might have right to come after the funds being raised to defer these medical expenses.

Question 2:
A relative has offered to gift us the balance remaining on our mortgage (approximately $175K). Same question applies here - from what date does the clock run? Filing or discharge date? Would we need to wait untill after August 22, 2011 to receive the gift? Or did the clock already run out on that. Or perhaps a gift of this nature is not a problem after discharge under any circumstance?

Thank you - just unsure if any of this is a problem

[ValleYum]

My personal opinons:

#1 - If the gifts/funds are for your hubby just make sure they are gifted to him since he wasn't involved in your BK. Also remember tax implications that the funds may be considered as income.

#2 - My thoughts would be a gift is just that a gift so it would be okay. Do remember the tax implications involved - no interest deduction for your mortgage and the funds may be considered as income.

Did you ask your BK attorney for his thoughts? With these possible large gift/donation amounts - it may be worthwhile to check with an accountant to do some tax planning - even if you have to pay for an hour of their time.

I am sure someone more knowledgeable will be along shortly with their thoughts.

I do want to wish your husband bright blessings and good wishes for a speedy recovery.

[debee]

Question 1: I remember something being said about inheritance, gifts or windfall after six months? Is that from filing date?

Question 2: Same question applies here - from what date does the clock run? Filing or discharge date?

You're required to report property you receive by inheritance, devise, bequest, through a property settlement with your spouse, final divorce decree, or as the beneficiary of a life insurance policy within 180 days of filing. You can read about it in 11 USC 541 (a)(5) here.

You're not required to report gifts.

Not a tax expert either, but my understanding is that the giver of the gift is taxed but not the recipient.

Were you a no-asset case? Is your case closed?

[ValleYum]

You're not required to report gifts.

Not a tax expert either, but my understanding is that the giver of the gift is taxed but not the recipient.

Were you a no-asset case? Is your case closed?

LOL Shouldn't have given an opinion after 2 glasses of wine. mmmm Reisling.

[debee]

LOL Shouldn't have given an opinion after 2 glasses of wine. mmmm Reisling.

LOL. Glad to know that someone else has the same habits and regrets as me. I thought your post was fine, for a drunkard. LOL. Kidding. It was better than my two-glass posts.

[ValleYum]

LOL. Glad to know that someone else has the same habits and regrets as me. I thought your post was fine, for a drunkard. LOL. Kidding. It was better than my two-glass posts.

LOL <hic>

[daylate]

Gifts are not taxable to the recipient-
As to the gift givers, people can give something like 12 or 13k a year to a person without being liable for a tax(there is a lifetime gift limit/exclusion too but that is for another day).

So my take is that you will be ok on the gift from the friends for your husbands medical expenses. If one of them were to give you more than the annual limit, they could get around it by giving some to you and some to your husband.

The relative who is going to give you 175k could have a gift tax issue-he or she may want to talk to a CPA to make the transfer in the most efficient manner.

Good luck to yoru husband on his medical procedures.

[keepmine]

This gonna sound pretty coldblooded but it's the flip side of the coin. Is he eligible for medicad?
What about life after the surgery? Are you 2 going to be able to make it financially?
I'd consider having the surgery and then have him file bk. Hold off on accepting gifts from friends until post bk when you might really need help.
Same thing with the mortgage. If you're going to struggle post bk don't pay off the mortgage and then have far too much equity to exempt if, you do have to file bk.
You have very generous friends and family. Use those resources in the most advantgeous way possible. Don't let someone payoff your mortgage and then, you turn around and put the home at risk due to bk or, unpaid medical bills.

[LadyInTheRed]

Just wanted to give some additional info regarding federal gift tax. Yes, it is the giver who has to worry about gift tax, not the recipient. The current annual gift tax exclusion is $13,000 per person. A married couple can give a total of $26,000 to one person, regardless of which spouse actually makes the gift. Somebody who stays within the $13K per person limit does not have to file a gift tax return. If you go above the $13k per person limit, you have to file a gift tax return, but you won't owe any taxes as long as you don't make more than $5M in reportable gifts in your lifetime. That's the 2011 and 2012 figures. In 2013, the lifetime gift tax exemption will go to $1M unless congress passes new legislation which it is expected to do. But, congress doesn't always do what is expected. Most experts agree that the lifetime exclusion will probably stay at $5M, but some say it could drop to $3.5M, but probably will not go lower than that.

ETA: I almost forgot a very important point. Anyone can make unlimited gifts for medical expenses as long as they pay the medical provider directly. The same applies for educational expenses.

For more info on federal gift tax, go to the IRS website http://www.irs.gov/businesses/small/article/0,,id=164872,00.html.

Your state may also impose a gift tax. So check for your state's laws too.