My dad would like to give each of my brothers & sisters $5000 from my mothers life ins money, now in his name. Is that money tax-free? There are 5 of us, all older than 18. We would like to use the money to invest for our own family or get completely out of debt. But we worry that this might be taxable income and would have to pay up to $1,700 in tax, is this correct? Or are we worrying about nothing? Thank you so much in advance for anyone who can shed some light on this.
2007-02-15 08:19:14 · 6 answers · asked by johnny j 1 in Business & Finance ➔ Taxes ➔ United States
If your dad is the beneficiary of your mom's life insurance, the life insurance proceeds from the insurance to your dad is nontaxable. What he does with the money is purely up to him. If he decides to give each of you $5,000, that is considered a gift from him to you. Since the annual limit for a tax-free gift is currently $12,000, the $5,000 he intends to give each of you is considered a tax-free gift. It would not trigger any tax at all.
Besides, if the gift exceeded the annual tax-free amount, the gift tax is assessed on the giver, not the recipient.
2007-02-15 08:23:20 · answer #1 · answered by jseah114 6 · 1⤊ 0⤋
Your dad can give a monetary gift tax-free every year, as long as it's below a certain amount. You'd need to check with a tax attorney on this, as it differs from state to state.
If you just want to pay your bills/debts with the money, then just have him pay $5000 worth of your bills. Done deal.
2007-02-15 08:26:46 · answer #2 · answered by tcsmoooth 2 · 0⤊ 1⤋
The money would be a gift to you from your father. There is a $12,000 per recipient exclusion from the Gift Tax so your father would not have to pay any Gift Tax on the funds.
The recipient of a bona-fide gift never pays tax on the gift.
2007-02-15 08:58:41 · answer #3 · answered by Bostonian In MO 7 · 1⤊ 0⤋
You're worrying about nothing. The money would be being given to you and your siblings from your dad, as a gift, and would not be taxable.
2007-02-15 16:12:04 · answer #4 · answered by Judy 7 · 0⤊ 0⤋
I would consider it a gift. If your Dad claims the entire amount on his taxes. If he says he gifted his kids on his income tax 'x' amount of dollars, then you have to claim it.
2007-02-15 08:26:47 · answer #5 · answered by Tapestry6 7 · 0⤊ 2⤋
your father can give you a gift--even money..
not taxable..
2007-02-15 08:23:58 · answer #6 · answered by cork 7 · 0⤊ 0⤋