QUESTION
Can I split the beneficiary money to my three sisters?
Asked on Nov 12th, 2013 on Estate Planning - Michigan
More details to this question:
My mother passed and left me as sole beneficiary to her retirement monies. Is there a way I can split this up between myself and my three sisters without a huge tax hit on me?
11 ANSWERS
Trusts Attorney serving Sacramento, CA
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Law Office of Victor Waid
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Seek the assistance of a tax accountant to advise you.
Answered on Nov 14th, 2013 at 10:18 AM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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It depends on what was done and how the funds were, and are, titled.
Answered on Nov 14th, 2013 at 10:12 AM
Estate Planning Attorney serving Seattle, WA
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Law Offices of Scott K. Wilson
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If you are talking about tax deferred accounts, as in an IRA or 401K, then unless you can disclaim a portion of the accounts, whenever you take a distribution you will have "income" for tax purposes. So if you withdraw $80K, and pay $20k to each sister and keep $20K for you, you will owe tax on $80K. If oyu effective state and fed tax rate is, lets say, 14%, then if you just "short" your sisters 14%, and send them $17,200 rather than $20K, it comes out fair. Regarding a disclaimer, this bears some more research. It may be that you can disclaim 75% ownership in each account, such that they end up being owned by each of you equally. The only thing "I remember about disclaimers is that it has to be in writing, has to be done within 9 months of date of death and has to be done before you have taken/received any benefit from these accounts before you have taken any money out.
Answered on Nov 14th, 2013 at 7:50 AM
Business Law Attorney serving Bingham Farms, MI
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James T. Weiner, P.C.
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You can pay all the taxes and split the balance with them. You can avoid gift taxes by giving away less than $1MM. However if you give less than the amount triggering a gift tax return (I think $17K annually) to each of them each year you can also avoid a gift tax return. Be careful thought if you do file gift tax returns eventually that reduces your $1MM estate tax exemption dollar for dollar.
Answered on Nov 14th, 2013 at 7:49 AM
Probate Attorney serving Newport, OR
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Minor, Bandonis & Haggerty P.C.
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Can't think of one, off hand. You should spread the distribution money out over your lifetime (assuming you mean IRA), and then each year you'll need to figure out what your tax is on the distribution and subtract a quarter of that figure from the amount you give to each sister.
Answered on Nov 14th, 2013 at 7:48 AM
Thomas Edward Gates
You may split the money and, there are no taxes if the distribution is less than $14,000. You would have to file a gifting form with your taxes.
Answered on Nov 14th, 2013 at 7:13 AM
Probate Attorney serving Saratoga, CA
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Douglass Law Group
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It is possible, under California law, to decline an inheritance by means of a disclaimer. This would allow you to disclaim a 75% interest in the retirement monies to provide for the funds to go directly to your three sisters. This is normally done shortly after the date of death. Certain requirements are necessary to disclaim assets, so you should consult with an attorney to ensure it is done correctly.
Answered on Nov 13th, 2013 at 11:49 AM
You can choose to decline three quarters of your inheritance. Assuming there is no one else who has a higher claim to your mother's estate and assuming your mother did not specifically exclude them from any inheritance, her other children (your sisters) would inherit the remaining portion. You can also take your entire bequest, pay any taxes on it that the estate didn't pay, and then gift each sister an annual amount which may be tax-free to them.
Answered on Nov 13th, 2013 at 11:49 AM
2 Awards
Gifting money is not a taxable event unless you gift more than $14,000 in one year (and then a gift tax return would be required but there would be not tax due unless it was millions of dollars) or you gift more than you exemption amount which is over $5M. I think you will be fine, but if you want to avoid a gift tax return and the amount exceeds $14,000 to each of them, you might want to give some this year and some more next year, etc.
Answered on Nov 13th, 2013 at 11:48 AM
3 Awards
It may be possible to disclaim 2/3 of the plan. You need to review the plan to see if that will work. I urge you to seek counsel for assistance.
Answered on Nov 13th, 2013 at 11:48 AM
Business Planning Attorney serving Livonia, MI
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Frederick & Frederick Attorneys at Law
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Certainly. Unless the money in question is more than $5,250,000.00, you can gift your sisters their share and not need to pay tax at all. You would need to file a gift tax return, but there should not be any tax.
Answered on Nov 13th, 2013 at 10:53 AM