[USER]

My Dad (Mom has passed) wants to pay off our mortgage in one lump sum to the tune of $450k. His viewpoint is he would rather give us our inheritance now than wait until he passes.

I understand gift tax exemption in a single year is $19,000 per person.

Is there a way to navigate this situation so that it isn’t considered a gift and thus avoiding gift tax?

Appreciate any insight!

[Eric]

Wow amazing. My family has never seen that kind of savings to do that stuff.

Awesome

[Joy]

Absolutely! As long as he doesn’t have more than the lifetime gift tax allowance he will be fine.

The $19k is really just a threshold for those that have more than $13.99 million.

[Christina]

Perhaps he can open a joint bank account with you. Then you can use funds from the joint account as you need to pay the mortgage.

I’d talk to a tax advisor to be sure.

[Elizabeth]

I believe Connecticut has a state gift tax—the above responses are mostly referring to federal gift taxes. I would double check if there are state taxes.

[Scott]

He just needs to complete Form 709. There are no tax implications to him or you from the gift.

The amount that is above the annual exclusion amount is deducted from his lifetime exemption amount ($13.99 million in 2025, due to fall to $7m in 2026 absent Congressional action).

[Kris]

There is no tax to the recipient or the giver. He just needs to fill out form 709. The amount he gives will go against his lifetime estate exemption.

Which currently is something like $13million. The state might have different rules.

[Alex]

Great answers, so federal lifetime exemption works in this situation.
Any insight into the state tax implications (i.e. I live in california)
Your state taxes could be affected?

[Janet]

My parents gifted my down payment on my house but they consulted with their accountant because there is a limit. They also set up a trust for when they passed and the funds we inherited from their trust was not taxed.

I do have to pay tax on the brokerage account that I inherited but not the sale of their home or their retirement accounts.

They had a good attorney that helped set up the trust.

[Sean]

While I cannot give you or your Dad personalized advice, few Americans will ever pay the federal gift tax. People like your Dad have a Form 709 filing issue.

They rarely have a “pay a gift tax” issue. Americans get a lifetime exception from gift tax currently over $13M.

Someone like your Dad could give a half million dollar gift to someone and simply file a gift tax return (a Form 709) reporting it and say to the IRS that their lifetime exception is now roughly a half million dollars less.

That’s all.

No big deal. Of course, if someone like your Dad somehow had previously made $13M plus in gifts to people, yeah, it’s possible he could owe gift tax, but even then there are tactics to mitigate it such as portability with respect to a deceased spouse’s estate.

[Kevin]

Yes, there is. He just has to fill out a form with his taxes declaring the gift to be part of the inheritance he is intending to leave to you. Zero taxes, minimal paperwork.

(Form 709 if I recall correctly.)

[Author]

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