Sharing life insurance proceeds with siblings

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PostPosted: Thu Mar 11, 2010 1:01 pm   Post subject: Sharing life insurance proceeds with siblings  

A friend's father passed away recently. Many of the insurance policies were in the name of the youngest son who is the most responsible of the three sons. This son would like to share the proceeds with his other brothers. Do these payments follow the rules of the federal gift tax? Meaning is he subject to the $13,000 limit per year for giving his brothers a part of the money?

Simonsez
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PostPosted: Thu Mar 11, 2010 5:35 pm   Post subject:   

In short, yes.



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dgoldenz
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PostPosted: Fri Mar 12, 2010 2:41 am   Post subject:   

Yup.



There are a few strategies that you could use to try and get around it, but that's most likely going to cause more problems than needed.

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PostPosted: Fri Mar 12, 2010 8:51 am   Post subject:   

Consult the insurance company he is applied to because some companies have some rules so need to contact the insurance company.

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PostPosted: Sat Mar 13, 2010 3:30 am   Post subject:   

This isn't an insurance company issue. This is a tax issue.

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PostPosted: Sat Mar 13, 2010 1:41 pm   Post subject:   

Thank you for all your help. My friend and I will be having a talk and investigating his wishes and desires versus his tax obligations. He may just have to gift the legal amount each year. That would probably be better for his brothers in the long run. Thank you!


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simnsez
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PostPosted: Sat Mar 13, 2010 1:50 pm   Post subject: insurance  

Federal Gift Tax: I've heard of this, but, really don't know the meaning of it. Can someone explain this, please?

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PostPosted: Sat Mar 13, 2010 8:17 pm   Post subject:   

Taxes are owed if someone gives away more than $1,000,000 in their lifetime. However, they can give away up to $13,000/year to as many people as they would like without cutting into their $1,000,000 limit.



Ex. I can give 1,000,000 people $13,000 and I will not owe any tax. I could do this every year. If I give one person $1,013,001, I will owe taxes on the gift. Every future gift that I give above $13,000 will be taxed.



Taxes are owed by the giver.

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