Life Insurance Taxable Irs
Pay Taxes on Gifted Life Insurance?
My mother died recently and I had to update my father’s life insurance beneficiary.
The form required witness signatures from two people who were not beneficiaries, so I set up my oldest brother as the only beneficiary and my younger brother and I signed as witnesses, with the understanding that after the oldest brother received the money he would distribute it to the rest of us. This way the oldest brother could also cover funeral expenses off the top.
There are 5 of us altogether and $250,000 in benefits.
It just occurred to me that though life insurance benefits are tax-free, gifts of over 12,000 are taxable.
Will the rest of us be taxed because this money is a gift from our brother? Or will the IRS recognize that this is simply the paying out of life insurance benefits?
if your only reason for putting your oldest brother as beneficiary is so you and younger brother can be witnesses, then you are setting yourself up for potential problems.
get your neighbor and his wife to be witnesses. they should do this as a favor and expect nothing for it in return. or get anybody else who is willing.
even if your older brother would never stiff you, what you did is a very bad idea. what if he gets married to a woman who later gets greedy and God forbid he dies. guess what? its ALL her money. no matter what you say its hers and hers alone. or what if he later changes his mind all on his own?
watch the people’s court and see how many cases involve family that thought they would never run into any problems.
