DEAR BRUCE: A lawyer told me the IRS no longer looks back on gifts to children. Is this true? I value your opinion. — Jim, via email
DEAR JIM: I am not sure why you are asking me about the IRS. Once a gift has been made appropriately, the IRS is out of it.
Look-backs are important when money is given to children and then some type of aid is collected, usually from Medicaid. When public benefits are paid to a person who has given money away, upon that person’s demise, the state may look to the receivers of the money and ask that the money be returned, at least as far as the receivers are able to return what was advanced during the individual’s lifetime.
In other words, if the money was clearly given to avoid paying the person’s bills, and it was given within the statutory look-back period, the state may come after the person’s estate.
There may be some reason the IRS at one time would be interested, but I can see no legitimate reason. If the money is given up to the limits allowed, that’s the end of the story, assuming the look-back requirement is satisfied.
DEAR BRUCE: I have an account with Edward Jones worth almost $136,000. I take out $400 a month. They charge me a fee of $31 to $145 a month. My account representative keeps telling me I am making 6 percent annually. Is this a smart investment? — John, via email
DEAR JOHN: It would seem to me that $31 a month is not unreasonable, but $145 seems a bit high. You say you are being told that you are making 6 percent annually. Is that net after expenses? If you are actually walking away with $8,000, it’s not bad in today’s world. On the other side of that, if it’s 6 percent less somewhere between $400 and $1,600 a year, that’s not so good.
There is certainly no reason you shouldn’t be shopping around to see if you can do better. Always take into account the fees. It is oftentimes a wonderful thing to be told you are earning a healthy percentage, but if you don’t take into account the cost of this earning, it is at best misleading.
Send questions to firstname.lastname@example.org. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.)
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