Will I be taxed if given Wrongful death money?

Asked almost 3 years ago - Phenix City, AL

Hi,
My dad is settling a wrongful death lawsuit of my brother, and he wants to give me $150,000 when settled, he claims I will not be taxed even if the money comes from him, because of the wrongful death, is this true?

Attorney answers (4)

  1. Jonathan Craig Reed

    Pro

    Contributor Level 16

    3

    Lawyers agree

    Answered . As a matter of federal tax law the portion of a personal injury settlement NOT DUE to lost income is not taxable to the award recipient. However, as I understand your question, your dad is getting the award and then is giving you money. The money he gives you may be subject to a gift tax that your father would be liable for. You and your dad really need to consult with a tax professional on this. The cost of a consultation will be small compared to the potential tax liability if this isn't done right.

  2. Christian K. Lassen II

    Pro

    Contributor Level 20

    1

    Lawyer agrees

    Answered . The money you receive is a gift from him, thus, you wouldn't pay tax on a gift.

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  3. Steven J. Fromm

    Contributor Level 20

    1

    Lawyer agrees

    Answered . It has nothing to do with the wrongful death. Under Section 102 of the Internal Revenue Code, gifts and inheritances are not taxable income. However, there are gift tax implications here. The law allows an annual donee exclusion of $13,000 and if a spouse joins in the gift another $13,000 is available. So if mom joins in the gift then $26,000 passes without gift tax to dad. As to the excess, this amount will use up $124,000 of dad's lifetime exemption of $5 million. Finally, dad will have to file a Form 709 to reflect this gift and the use of the annual exclusion, spousal joinder and the use of his lifetime gift tax exemption. He needs to see a tax attorney to get this done right. For more on this topic please see Gift Tax Rules and Gift Tax Returns at http://sjfpc.com/Gift_Tax_Rules_Returns_Form_70...

    Hope this helps. If you like this answer and have a Google account , please hit the +1 sign above. It takes just a second to do this and it would be most appreciated and would help others. Thanks.
    Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is sjfpc@comcast.net , his website is www.sjfpc.com. and his blog is

    LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia... more
  4. James Otto Heiting

    Pro

    Contributor Level 14

    1

    Lawyer agrees

    Answered . If the money comes from him, and not from the lawsuit, you would be subject to a gift tax. If you receive the money as a plaintiff in the lawsuit, with a legitimate claim for the death of your brother, you would have no tax liability, at least in California and federally.
    I agree: you and/or your dad should see a tax consultant in the state(s) involved.

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