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  1. #1
    Join Date
    Jan 2019

    Default How to Protect Profits from a Business

    My sibling has $300,000 that was generated in a business I provided the idea for but I had no involvement in the operating of the business. He paid all of the taxes as he should, and is now left with the $300,000...of which half is mine. There are no disputes about the $150,000 that is mine.

    I'm not in any huge hurry to get the money, and am fine with getting $14,000 per year gifted to me tax-free. We do, however, want to get the money protected in case he gets married and dies or whatever. It seems like an irrevocable trust is the best solution - agree?

    If that's the solution, how would that work - the trust would gift me $14,000 per year?

    Thank you!

  2. #2
    Join Date
    Sep 2005
    Behind a Desk

    Default Re: How to Protect Profits from a Business

    If you are content to treat both ownership of the business and the profits it generates as his, with his being responsible for all of the taxes and then choosing to make gifts to you, the consequence of that choice is that you are entirely at his mercy if he decides to stop making gifts to you. To the extent that he has not yet gifted you the full $150,000, your only protection is that he chooses to continue making gifts to you.

    If he wants to place the money into a trust, he is free to do so. He could set up a trust that makes annual gifts to you. But really, with the lifetime gift/estate tax exclusion being what it is, if he has the cash lying around he could simply gift you the rest and odds are that it will have no tax impact on his estate.

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