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Receiving large sum of cash from non-relatives

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Alt-ID for obvious reasons.

For the past several years, I helped out an elderly family I know but I am not a relative.  They're just good folks and confided in me looking for advice when they ran into financial troubles.  Because of this, I began picking up many of their bills when they couldn't make ends meet.  I never expected to get the money back, just wanted to help them out.  No formal agreements with them, no documentation, nothing other than the good feeling I got from helping out some folks who were in need.

Fast forward to this month, their position has changed considerably.  The father says he's been keeping track and now that he's able to do so, wants to reimburse me about 50k for the bills I covered over the past years.  This probably isn't the total amount I covered, but, again, I never expected to see a dime of it come back to me.

My question is how to accept a payment this large without looking like a drug dealer or ending up with the bank reporting me to anyone they can think to tell?  Sure, I could ask for cash, but I'd really rather not.  I'm sure if they tried to withdraw that much cash the bank would be all over them about it.

Ideas on the best way to keep all involved out of trouble?  Thanks.

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write a check?

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If I walk into the bank with their personal check for 50K, isn't that going to set off all sort of warning bells?  

Also not sure if any of this would fall under gift tax rules?  Since I never expected to get any of it back, I never really thought about the potential complications.

Or, am I just overthinking the whole thing?

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generic2 said:   If I walk into the bank with their personal check for 50K, isn't that going to set off all sort of warning bells?  


 

 If you mean, deposit it into your own account, that's like the most normal thing you can do at a bank. If you mean, cash it , then maybe.
Or, am I just overthinking the whole thing?
If your thread had been about the non-relative handing you a paper bag of $100s, then we'd have an interesting thread. But this is vanilla stuff thats the whole point checks exist.

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generic2 said:   If I walk into the bank with their personal check for 50K, isn't that going to set off all sort of warning bells?  

Also not sure if any of this would fall under gift tax rules?  Since I never expected to get any of it back, I never really thought about the potential complications.

Or, am I just overthinking the whole thing?

The gift tax is his problem, not yours. You just deposit it and the bank will probably make you wait for it to clear.

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IF I recall correctly the life time exemptions should cover gift taxes both ways. If he writes a thank you note saying what you say he said, that should cover it in my mind, but I am not the taxman.

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generic2 said:   If I walk into the bank with their personal check for 50K, isn't that going to set off all sort of warning bells?  

Also not sure if any of this would fall under gift tax rules?  Since I never expected to get any of it back, I never really thought about the potential complications.

Or, am I just overthinking the whole thing?

  Yes, you are over thinking this.

Annual gift tax exemption is 14k. If you and the elderly folks are married, that would essentially 56k annual exemption.
Besides, gift tax are owed only if you exceed lifetime exemption (~5 million for federal). If you are over the annual exemption but under the lifetime exemption, all the giftor needs to do is to file a gift tax return (no actual tax owed).

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tell him to withdraw $2k-$$8k/week in cash for X weeks. (skip some weeks).

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fufihope said:   tell him to withdraw $2k-$$8k/week in cash for X weeks. (skip some weeks).
  Do you suggest handing over the cash in person. Perhaps have an established drop off location. Different place each week?

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fufihope said:   tell him to withdraw $2k-$$8k/week in cash for X weeks. (skip some weeks).
  Yes, might as well toss on some structuring charges...

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generic2 said:   If I walk into the bank with their personal check for 50K, isn't that going to set off all sort of warning bells?  

Also not sure if any of this would fall under gift tax rules?  Since I never expected to get any of it back, I never really thought about the potential complications.

Or, am I just overthinking the whole thing?

  If you walk into your bank and deposit a $50k check, its more likely the teller will try to sell you on one of their excellent savings accounts to keep the money in. 

They're repaying a debt.  You might've already written it off, but had you not given it to them in the first place you wouldnt be receiving anything now - they are simply giving you your money back, now that they're unexpectedly able to. 

And whatever you do, do not ask an elderly family to give you $50,000 in physical cash.  The cops probably will end up involved, once the bank teller where they withdraw the funds reports it as possible elderly abuse/scamming.  Then you can try to explain why you wanted $100 bills instead of a check, without digging yourself a hole.  If you are worried about things looking suspicious, dont intentionally make things look even more suspicious.

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generic2 said:   how to accept a payment this large without looking like a drug dealer ...  I could ask for cash
 

  
That is the exact worst approach.

I get that the government overreaches in the name of combating crime, but its causing people to be overly paranoid for simple transactions. If the bank can clearly see the source of the funds (e.g. a check from a nice elderly couple), then why on earth would they suspect that you got it from selling drugs?

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ACH, wire, or check. No big deal.

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IANAL.

Get a lawyer to write up & or Notary to witness a letter of repayment/gift (choose yourself - I'd choose repayment). Keep the letter with all other financials. And of course by check.

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Glitch99 said:   They're repaying a debt.  You might've already written it off, but had you not given it to them in the first place you wouldnt be receiving anything now - they are simply giving you your money back, now that they're unexpectedly able to. 
 

  I'm not so sure this was a loan, actually.  No agreement and no expectation of repayment, together with OPs description of the circumstances, sounds more a gift to me.  I agree about the rest of what you said, ie check payment for sure.  OP should decide how he wants to treat it, loan vs gift, and have them note the check accordingly ("gift" or "loan payment"). 

possible issues for OP:
1. Gift.  If they are giving him a gift, the gift tax implications are on them, which should involve falling some paperwork on their end if they want to be super careful about it.  Technically a gift over $14k should involve paperwork to reduce the giver's lifetime estate tax exclusion, not that tax would be due until that was used up.  Of course with the $5M estate exemption per person, it seems far fetched that an elderly couple who had trouble paying their bills would suddenly end up with more than $10M in assets by the time they die, so I wouldn't worry about it if I were them.  Even if they didnt the paperwork for a gift over $14k, it wouldn't matter in the end.

Also, OP might have been responsible for gift tax paperwork (to reflect a reduction in his lifetime estate exclusion) if he gave them more than the $14k/person/year in his bill paying assistance.  Being a FWFer, it's not out of the question he might end up with an estate someone tries to tax.  However, with two of them as gift recipients and over "several years", I think he's probably in the clear for not having to file any paperwork (not that any of this stuff gets checked on super carefully). 

2. Loan.  If it was a 0% loan, OP may eventually owe a tiny bit of tax on imputed interest.  The short term AFR minimum rate, depending on when the loan was made, might be 0.5-1% annually.

https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/...
https://apps.irs.gov/app/picklist/list/federalRates.html

That said, I'm not 100% sure if OP was supposed to be reporting taxable imputed interest when there was no expectation of collection, or if that can be delayed until the repayment is actually received.  For example if he loaned them $75k in total (ask the husband, who apparently was keeping track), maybe the taxable AFR imputed interest isn't due until he gets his whole $75k back.  

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When people that do something so altruistic are afraid of being accused of violating some unknown law it's an example of how things have gone wrong.

OP, if you have given them over $50k over the years, the 'gift/loan' issue works both ways. At this point, they are returning the gift that you have given them. Find the evidence of the money you gave them over the years and save that along with copy of the check they repay you with.

Cash Transaction Reports don't apply to checks and generally, you will know if the bank is writing up a Suspicious Activity Report on you because they will ask a couple weird questions like what do you do for a living and can I see your ID. Deposit the check in full with no cash back and there is no reason for them to ask those questions.

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Really, this isn't an issue. Have them write a check, and if you want to be covered, just prepare a short letter for them to sign saying thank you for your assistance over the years, and here's repayment of the help they've given you. Then, if the IRS ever brings it up (which they almost certainly won't), you can produce the letter.

You've got nothing to hide, no reason to create suspicion by making it look like you do.

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gatzdon said:   When people that do something so altruistic are afraid of being accused of violating some unknown law it's an example of how things have gone wrong.

OP, if you have given them over $50k over the years, the 'gift/loan' issue works both ways. At this point, they are returning the gift that you have given them. Find the evidence of the money you gave them over the years and save that along with copy of the check they repay you with.

Are there any rules dictating the timeframe in which a gift must be rejected and returned, before it is considered a loan or reciprocating gift?

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fufihope said:   tell him to withdraw $2k-$$8k/week in cash for X weeks. (skip some weeks).
  
This is the second step of Hasterting, the first is touch some little boys, the third is go to jail.

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Much ado about nothing.  Deposit the check.

As an aside, do these elderly friends have adult children who don't know about your little arrangement?  I would expect more scrutiny from an estranged family member who thinks that their crazy old parents are giving the family fortunes away to some stranger.  Honestly, the whole arrangement sounds a little strange to me - poor old folks can't afford to pay their bills suddenly have $50k in spare change lying around?

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I just deposited a check at the teller for $78k.
Teller: "This is a large check, let me get the manager"
Me: "OK"
Manager: "deposit the check".
Teller: "OK, the computer tells me the funds will be available in 24-48 hours"
Me: "OK. thank you"

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It's a check, deposit it.
If it is part of a scam, you will know shortly.

If you are trying to apply for house, that 50k will look extremely suspicious.

If it was to pay for drugs, get ready for the police to ram in your door.  haha

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forbin4040 said:   
If you are trying to apply for house, that 50k will look extremely suspicious.

 

  if OP has one from another bank, OP can deposit it into another checking acct

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supersnoop00 said:   
generic2 said:   If I walk into the bank with their personal check for 50K, isn't that going to set off all sort of warning bells?  

Also not sure if any of this would fall under gift tax rules?  Since I never expected to get any of it back, I never really thought about the potential complications.

Or, am I just overthinking the whole thing?

The gift tax is his problem, not yours. You just deposit it and the bank will probably make you wait for it to clear.

  No, the gift tax is none's problem here. Nobody.
Technically, Neither OP gifted this money to the elderly person nor this elderly person is trying to gift OP money today. If you cut out all the emotional good feelings and helpings....the core of the transaction is: person A paid legitimate bills of person B for a period of time. This is set in stone...this part of the equation cannot be reversed......neither A nor B is denying this.......also the elderly gentleman did in fact state to OP that he has been keeping track of all these bills......and if OP is telling everything true here then he definitely has some significant paper trail on his end (like did he use credit card to pay those bills? or did he use checks to pay those bills? or did he use online bill payment? or did he use ACH transactions to pay such bills?....op definitely used one or some of  these clean legitimate means to pay all those bills over the years)..
So, net net, Dear OP, just go ahead and have the elderly person pay you a personal check and also request him to do a simple 1 page signed document stating facts and why he thinks giving you $50K is a happy and reasonable settlement of his debt. I will tell you why I feel this 1-page document is the MOST IMP artifact. Doing such formal documentation (and attach yours + his paper trail) will forever eliminate YOU BOTH from any unforeseen greedy claims coming from kith & kin & heirs etc etc etc etc in the future. You never want to find yourself in a situation of having to explain to any person or law enforcement agencies that you stole monies from an elderly person.

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I'm sure you can obtain records of the bills you've paid on their behalf if need be. This will help you if the IRS tried to claim it's income, and help them if the IRS tries to impose a gift tax.

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Good point on avoiding elder abuse claim, dealgain!

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I really hate it when an OP never comes back to a thread, so here I am.

Thank you for all of the input, it is most appreciated and confirms my overthinking.

To address a few of the comments:

I mostly have a trail of checks I wrote to them over the years, so that's covered.  They paid their bills with the money, that trail could also be proven.

They have no remaining living children/heirs.  Their son passed away late last year and that's part of why they are now in a better position.  He didn't help them much in life, but most of his estate went to them when he died.  That is one of the reasons I originally stepped in - these are good folks who were close to losing everything and they really didn't have anyone who gave a crap about them.  The son pretty much ignored them, never visited, only cared about himself.  It hurt me deeply to see it happening.  I offered help with budgeting and getting things under control, and then realized that amounts that weren't really life changing to me were life changing for them.  Best part is they have continued on a positive path, they were sincere in their desire to turn things around and hopefully now they can breathe a sigh of relief and maybe get to enjoy some of the years they have left.

An aside - while I generally live the FWF lifestyle, this has been an eye-opener for me.  Yeah, I could probably buy a fleet of Crown Vics, a ton of H&B, and 3 chicks same time with the money I spent on these folks, but doing this felt strangely good.  Doing something that made a real difference on a local and personal level.  Not because I had to, just because I wanted to do.  Strange, not what I would have expected from myself, and now that it's coming back to me, even stranger...

Again, thanks for all the input.  I'll make sure things are adequately documented and call it a day.

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Thanks for the update and more importantly for doing a good deed.

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generic2 said:   ...most of his estate went to them when he died.... I offered help with budgeting and getting things under control, and then realized that amounts that weren't really life changing to me were life changing for them.  Best part is they have continued on a positive path, they were sincere in their desire to turn things around and hopefully now they can breathe a sigh of relief and maybe get to enjoy some of the years they have left.So they had no savings and for several years their income was $50K short of sustaining their lifestyle, and you are saying this one-time lump sum is gonna change this? I hope it was a huge sum and they don't blow what's left of it after paying you back, otherwise you might be helping them again soon.

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Why are so many people afraid of cash? You don't have to put this money in a bank.

Get the cash (real paper money) and use it as you wish. Why do you have to have a bank involved?

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generic2 said:   An aside - while I generally live the FWF lifestyle, this has been an eye-opener for me.  Yeah, I could probably buy a fleet of Crown Vics, a ton of H&B, and 3 chicks same time with the money I spent on these folks, but doing this felt strangely good.  Doing something that made a real difference on a local and personal level.  Not because I had to, just because I wanted to do.  Strange, not what I would have expected from myself, and now that it's coming back to me, even stranger...
Kudos for your good works, but I have to make an observation about this comment.  This idea that frugality is somehow incongruent with charity and compassion for humanity comes up from time to time here and couldn't be further from the truth.  My experience is largely the opposite - that those consumed by wealth and extravagance are often some of the most self-absorbed individuals I know and do/care little for others.  My sense of FWers over the years is that we're a pretty good lot when it comes to helping out the less fortunate.    

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prosperity said:   Why are so many people afraid of cash? You don't have to put this money in a bank.

Get the cash (real paper money) and use it as you wish. Why do you have to have a bank involved?

  At the very least, that much cash is impractical and a nuisance.  Because large quantities of cash are impractical and a nuisance, using them creates a suspicion that they're being used to avoid recordkeeping and a paper trail.  

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There's a pretty good chance I wouldn't live long enough to spend $50k in cash without making otherwise unwanted changes in my habits.

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Typical half-right, half-wrong tax advice from FWF.

+  Payment from Friend is a gift.  Can't be debt repayment, OP never expected repayment.
+  If Friend and spouse are nowhere near the federal estate exemption ($5.49m in 2017, per person) or state exemption (if applicable), then have Friend write a single check.
+  If federal/state estate tax is a potential issue, write multiple checks in amounts not exceeding annual gift exclusion(s) (federal $14k in 2017).   Friend to OP, Friend to OP Wife, Friend Wife to OP, Friend Wife to OP Wife.
+  Very simple documentation is all that's needed or advisable (a Thank You card will do).  No need to mention OP's past benevolence.

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prosperity said:   Why are so many people afraid of cash? You don't have to put this money in a bank.

Get the cash (real paper money) and use it as you wish. Why do you have to have a bank involved?

The assumption is OP's not going to take the cash and spend it on H&B or a new car.  The risk of having that cash lost/stolen/damaged is far greater than that of having a nosy bank teller fill out a report that goes nowhere since the source of funds is legit. 

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SlimTim said:   There's a pretty good chance I wouldn't live long enough to spend $50k in cash without making otherwise unwanted changes in my habits.
I had previously vacationed in Ireland / N. Ireland and it took me about a month to realize I only had EUR and GBP in my wallet.  

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SlimTim said:   There's a pretty good chance I wouldn't live long enough to spend $50k in cash without making otherwise unwanted changes in my habits.
 i can pay my Chase Credit Cards with cash at branch. 

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generic2 said:   If I walk into the bank with their personal check for 50K, isn't that going to set off all sort of warning bells?  

Also not sure if any of this would fall under gift tax rules?  Since I never expected to get any of it back, I never really thought about the potential complications.

Or, am I just overthinking the whole thing?




No, it's not going to set off anything. It's $50k, not $50m.

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cestmoi123 said:   
prosperity said:   Why are so many people afraid of cash? You don't have to put this money in a bank.

Get the cash (real paper money) and use it as you wish. Why do you have to have a bank involved?

  At the very least, that much cash is impractical and a nuisance.  Because large quantities of cash are impractical and a nuisance, using them creates a suspicion that they're being used to avoid recordkeeping and a paper trail.  

  And that's ignoring the fact that in order for OP to receive this $50k in cash, the elderly couple first has to get their hands on $50k cash.  That alone can cause problems, especially if the family is known to be of limited means.

Skipping 21 Messages...
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jerosen said:     
I tried to take a measly $200 out of my credit union and the crackpot behind the counter launched a massive speech about it : ... 


Nitpick: Bailey Bros. Building & Loan Assoc. was not a credit union. It was presumably organized and doing business under New York law as a mutual savings bank. 
Also: Seems a good time to review the "Lost Ending," found after 40 years: https://hulu.com/w/45b
  

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