Normally yes, 529 contributions are subject to gift tax limits (currently $17,000 per donor per recipient annually without filing a gift tax return). However, qualified rollovers from one education account to another are exempt from these limits. Since this was a rollover from a Coverdell ESA to a 529 for a qualifying family member, it doesn't count against the annual gift tax exclusion - it's treated as a transfer of an already-existing education benefit rather than a new gift. That's one of the many advantages of doing a proper rollover rather than taking a distribution and making a new contribution.

Creating a formal partnership with an undocumented person doesn't magically solve immigration issues. There are complicated legal implications beyond just taxes. Some business structures could create bigger problems.

Not really helpful. People in mixed-status partnerships still need to handle their taxes properly. Tax compliance is separate from immigration issues, and staying tax compliant is actually important regardless of status.

You're right, my comment wasn't very helpful. I was coming from a place of concern but didn't express it well. Tax compliance is definitely important and separate from immigration matters. The IRS has specifically created systems like ITINs to ensure everyone can meet their tax obligations regardless of status.

Do you have a template for that spreadsheet you could share? I've been trying to figure out a good way to track this stuff. Also, when you adjust quarterly, do you have to submit a new W-4 to your employer each time? Is there a limit to how often you can change it?

I don't have a shareable template, but it's pretty straightforward. I just have columns for pay date, gross pay, federal withholding, state withholding, and running totals for the year. Then I use the tax brackets to estimate what I should owe based on current earnings. There's no limit to how many times you can submit a new W-4. Employers are required to implement your new withholding by the start of the first payroll period ending on or after the 30th day after you submit it. Some companies let you update it through their HR portal which makes it much easier. I just go to my payroll department quarterly with a new form - they're used to it now.

That's an interesting approach I hadn't considered! So if we owed $9,000 total last year, as long as we withhold at least that amount throughout this year, we wouldn't face penalties even if we actually owe more come tax time? That could definitely help with the cash flow issue while ensuring we're compliant. Would the 110% rule apply to us since our combined income is over $150k?

Yes, that's exactly right. Since your combined income is over $150,000, you'd need to withhold at least 110% of last year's tax liability to qualify for the safe harbor. So if you owed $9,000 last year, you'd need to withhold at least $9,900 this year. The advantage is that you can distribute this more evenly across your jobs instead of having one job withhold a huge amount. You can calculate exactly how much extra to withhold per paycheck to hit that target. Then any additional amount you might owe, you can save up yourself and earn interest on it until tax day instead of giving it to the IRS early.

I've heard about the checkbook IRA LLC approach but wasn't sure if it actually helps with the UBIT issue or just makes property management easier. Does the LLC structure actually change how the IRS views development activities for UBIT purposes?

The LLC structure by itself doesn't eliminate UBIT concerns. The IRS looks through the LLC to the underlying activity. The main advantage is operational flexibility - you can manage the property without going through the custodian for every transaction. Regarding UBIT specifically, the LLC doesn't change the fundamental rules about what constitutes a business activity versus an investment. What it can do is give you more control over how activities are structured and documented, which might help in borderline cases. For example, you can more easily document the investment purpose of improvements if you're managing the books directly.

That's playing with fire! Intentional prohibited transactions can have consequences beyond just the taxes and penalties. The IRS doesn't look kindly on deliberate end-runs around the rules. I'd be super cautious about this approach.

I hadn't even thought about state taxes - we're in Washington state. Do different states have their own separate estate tax systems? Is there a way to look this up?

Yes, Washington state definitely has its own estate tax, and the exemption amount is much lower than the federal one - around $2.2 million last I checked. This is exactly the kind of situation where your uncle needs good planning! Washington's estate tax rates are progressive, ranging from about 10% to 20% for larger estates. There are some planning strategies that work specifically for Washington state taxes. You can find the basics on the Washington Department of Revenue website, but this is absolutely something your uncle's estate attorney should be addressing specifically.

Being a trustee doesn't generally create personal tax implications for you. The trust is its own tax entity with its own tax ID number. As trustee, you'll be responsible for ensuring the trust tax returns are filed, but you don't report trust income on your personal return unless you're also a beneficiary receiving distributions.