I've read the IRS rules, and from what I understand, my wife can gift me whatever she wants with no gift tax limit ($14k) coming into play.

Here's what we want to do: she just received an a substantial amount of cash from a trust after a family death. Taxes have been taken out for her and she received a check. She wants to deposit the whole thing in my bank account right now so I can wipe away all debt (bank account and debt is solely in my name). After that is done, we want to park it in savings until we can set up an investment fund for her. At that time, I want to move money from my savings account to her investment account, essentially gifting money back to her.

First, am I correct in thinking that neither one of us are liable for a gift tax? Unless I'm missing something, this won't count as income for me, etc., just a non-taxable spousal gift. Second, what kind of documentation do I need to retain to prove it was a gift in case the IRS asks? Their FAQ seemed clear but I'm no financial person. Sorry for questions that may seem stupid, but I've never had to deal with large amounts of money at once and I don't want to make some rookie mistake. Only concerned with fed taxes, nothing to worry with in my state.

Married filing jointly? No difference I would think.

Married filing separate. We usually keep all finances separate.

Open a joint non-interest bearing checking account.  Your wife puts the inheritance money there, you write the check from that account to pay off your loans.  Once that's done you can "pay her back" as needed by putting money back into that account, otherwise the money is all "hers" to spend or invest.  If you want to keep track of his/hers within that account that's all on you.

She owes no taxes.  Why were taxes taken out and who did it?  Someone stole from her. . .

Marital gifts in any amount are tax free.  She gives you money, you give it back, no issues at all.  No paperwork needed, and no special accounts required.

Estate taxes the estate owed were probably deducted from the estate and paid prior to disbursement of the assets of the trust if the estate was valued over 6million and no other exemptions were previously utilized.

Could be.  But the op said that taxes were taken out for her.  That's a very different thing.  Estate taxes aren't her thing at all.

OK, thanks for the input. The joint account is what we'll do and just have it all alone until we can figure out how to invest.

What have we come to when the tax rules are so complicated people have to ask for permission and instructions on how to give their spouse money?

It's only weird when you file married but separate taxes.

If they filed jointly (99% of the time) it wouldn't be an issue.

married filing separately is a beast, usually costly, and not recommended very often.

Married filing separate has no bearing on this transaction.  There is nothing to report when funds are exchanged between spouses.

On an aside, it is highly uncommon and not usually beneficial to file separately.  I was married this year and I'm excited because I will benefit with a $1,030 reduction in my tax bill because of it!

Congrats newlywed!

On another note, that must have been a large estate to have had to pay taxes. Unless you are talking about taxes regarding property or the interest paid out until disbursement.

Some states have their own estate tax. The federal exemption is up to $5 million or something, large enough that no one I know has to worry about it. Yet some states have a lower exemption, or none at all.

Louisiana got rid of theirs a while back. Nothing like taxing money that has been taxed already

This ^^^^

OP, why are you filing taxes separately? You're married for goodness sake. Unless you happen to fall into the less than 1% of people that can benefit from filing separate taxes, you're pissing money away to Uncle Sam by filing separately...

Even if you keep your personal finances separate (a practice that boggles my mind but is off-topic) you can still file taxes jointly...

You are good. There are no limitations or restrictions when it comes to gifts between spouses. It doesn't matter if you file jointly or separately.