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?
Car / Auto Accident Lawyer
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.
3 lawyers agree
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
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Personal Injury Lawyer
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.