If you win the lottery and said even though 50 million people, and we want to give half of my family, how is the tax rate to pay? Looked everywhere, but all I find is a $ 12,000 gift rule. Is the rack, which says donations of more than 1 + million, will pay 10-20%;

 

Comments

  • Bash Limpbutt's Oozing Cyst©

    August 30, 2009 at 10:54 am

    You won’t be able to give away half of a $50 million hit and have anything remaining for yourself. If you did, you’d be deeply in debt to the IRS for the rest of your life.
    You’ll surrender at least 35% for Federal income taxes plus whatever your state grabs. Assuming that your state nabs 5% that will leave you with $30 million after taxes. If you give away $25 million the Gift Tax on that would be around $10 million, or $5 million more than you have on hand.
    You can gift up to $13k per year per recipient to an unlimited number of recipients every year. Once you exceed the annual exclusion you use your lifetime unified credit to avoid the gift tax on the next $1 million. After that gift taxes kick in. The rates start around 18% and rise rapidly from there to around 45%. The rate is lifetime cumulative and will also affect the estate tax rate when you pass on as the gift tax and estate tax are linked.
    I realize that this question is just an exercise in egalitarianism but if you actually found yourself in such a situation an in-depth consultation with a financial planner and tax professional would be essential. There are a number of ways to share the wealth and dodge most taxes legally but giving away half is NOT one of them.
    Some things that you CAN do without paying any gift tax:
    Give everyone the maximum annual exclusion (currently $13k) every year. You can do this as long as the money holds out without incurring any gift tax liability. And the amount of money is modest enough that nobody is likely to “get stupid” with it, a common problem with sudden wealth. If you are married, your spouse can give away an equal amount to everyone effectively doubling the largess. (Gifts to a spouse are not taxable so your spouse can receive an unlimited amount from you and do with it as he or she pleases.)
    Give everyone a Harvard education. Just be sure to pay Harvard directly. Gifts of an education are not taxable as long as you pay the educational institution directly.
    Pay off everyone’s medical bills. Gifts of medical treatment are not taxable. As with an education, pay the provider directly to qualify for this.
    Set up trust funds for everyone and fund them with the maximum annual exclusion. You can use the trust to control when they get the money and even what they can do with it. This is an excellent vehicle for irresponsible family members who might otherwise blow it on inappropriate things.

  • Bash Limpbutt's Oozing Cyst©

    August 30, 2009 at 11:40 am

    First,about 50% will be with held for taxes,so you will be left with 25 mil. (about).
    The $12,000.00 rule is the amount you can give without having to pay the gift tax to an individual.
    Above that,you have to file gift tax forms with the IRS and pay the taxes on what you give away to family.

  • You need about 10 million more in your bank account from previous savings to gift 25 million to your family.
    Assuming 40% tax on 50 million, you will get $30 million (you may even get less than this).
    Now you gift 25 million. Gift tax can be about 14 million. So you will be short by 9 million.

  • You would pay the max tax rate on the entire amount before you receive it. The max rate for Federal is currently 35%. That would leave you $32.5M. If you give $25M to your family the rest would get used up paying the gift tax leaving you nothing. Haven’t looked up the gift tax amount lately.

  • Usually, you’d have to pay around 50 percent. But they’d make you pay before you can do anything with it. So you’d be giving the remaining 25mil to your family.

  • You’d pay income tax on the whole $50K, and also owe a gift tax. Look in the gift tax instructions for the calculation. It won’t be small.

  • You have to pay $400,000 taxes for every $1,000,000 you give away to family/friend.

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