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?
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.
The money you receive is a gift from him, thus, you wouldn't pay tax on a gift.
Click on name or picture to see profile page.
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_709.html
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 firstname.lastname@example.org , 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 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 email@example.com , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.
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.