You have clients who have substantial income and accumulation. Dr. Patricia Lange age 52 earns about $350,000 a year. Her husband Jonathan Lange, age 54, is in a medium-size accounting practice and his income is $200,000. They have two children ages 24 and 22.
You have clients who have substantial income and accumulation. Dr. Patricia Lange age 52 earns about $350,000 a year. Her husband Jonathan Lange, age 54, is in a medium-size accounting practice and his income is $200,000. They have two children ages 24 and 22. Both children are in the beginning of their working careers and are making entry-level wages and are not yet living outside of the family home. The Langes are accumulating nicely in their retirement plans and have some flexibility to make gifts.
Alternative 1
Both children have health insurance options where they are employed. For the purposes of cost they chose the HSA/high deductible health care plan. The Langes would like to help out with this. They come to you with the idea that they would like to fund the maximum HSA contributions for both children and continue every year if cash flow supports this. They also suggest to you that they would maybe pay for any out-of-pocket health costs incurred by the children rather than have their children use their HSA account to make the payments for the out of pocket healthcare costs.
Provide the Langes with the following information:
1. What are the gift tax implications? Exclusions? Compliance necessary?
2. What are the income tax implications?
3. What are the nontax goals achieved by this plan? Any drawbacks?
Alternative 2
The Langes have an idea to make a maximum Roth IRA contribution for each of their children. Clearly they would not be eligible to create a Roth for themselves because of their income. Both children are earning nowhere near the modified adjusted gross income phaseout amount that starts at $129,000 for 2022. It’s unlikely that they would fail to be eligible for at least a few years depending on their career track. The Langes would continue this annually as long as their cash flow is good.
Provide the Langes with the following information:
1. What are the gift tax implications? Exclusions? Compliance necessary?
2. What are the income tax implications?
3. What are the nontax goals achieved by this plan? Any drawbacks?
Alternative 3
The Langes come to you with the idea that they would like to purchase an I bond each for themselves with the maximum $10,000 investment with the children as remainder beneficiaries. They also want to buy a $10,000 I bond for each child. They suggest that they would like to continue this on an annual basis if they have the cash flow.
Provide the Langes with the following information:
1. What are the gift tax implications? Exclusions? Compliance necessary?
2. What are the income tax implications?
3. What are the nontax goals achieved by this plan? Any drawbacks?
