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When my father had passed away, all of us kids signed off on the rights to any of his money/assets to our mother. Upon receiving the money, she had paid taxes on them. She then dispersed an amount off to each of her children.

Since taxes on this money has already been paid for, do I have to pay additional tax on the amount I receive from her?

Edit: In the U.S. - State of California.

I don't know how to explain what the money was really... there was some sort of flow-over medical fund from the company he was working for. He got into a vehicle accident as a truck driver. The overflow money for the medical went into a private account to be held for medical care expenses for my dad as he was permanently hospitalized. After he passed, that money was then transferred to my mother.

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    What country is this? what you describe doesn't sound like it would be handled in the US. If only for the fact that there's an unlimited (opposite sex) spousal inheritance with no tax.
    – JTP - Apologise to Monica ♦
    Jun 17, 2013 at 17:53
  • @Joe, but the kids gave a gift to the mother, it doesn't appear that she was the only heiress, they had to assign the rights to her... At least that's how I read it.
    – littleadv
    Jun 17, 2013 at 17:57
  • Disclaiming one's share is "nice" but not a "gift" for tax purposes in the US. Non of the question sounds USian to me.
    – JTP - Apologise to Monica ♦
    Jun 17, 2013 at 18:00
  • added some info
    – Anthony Miller
    Jun 17, 2013 at 18:13

2 Answers 2

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No matter how the money was received/inherited by the parent, the receiver of the gift (in this case the child) will not owe any taxes.

If it is below the annual gift exclusion the parent will not owe any taxes or need to fill out any forms. If it is above the annual exclusion then it will depend on how the money was transfer to the child/grand children. One check to the family would not be a good way for the parent to distribute the funds. A check to each person in the family unit (child, spouse, grand child) will allow a large amount to be transferred each year.

Because the OP doesn't have a clear understanding of the source of the funds, and any taxes that might or might not have been paid at that time, and the parent isn't willing to discuss this information with the OP; the source of the funds is irrelevant to the answer.

do I have to pay additional tax on the amount I receive from her? No.

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  • Your last sentence? No, but she might. You are right to clarify that the recipient is never responsible for the inheritance or gift tax. Except when they are. If the estate is closed, and the proper taxes not paid, the IRA is going to follow the money, and ask the recipients to pay their share.
    – JTP - Apologise to Monica ♦
    Jun 17, 2013 at 20:09
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In the US, an opposite-sex spouse who is a citizen as well, can receive an unlimited inheritance with no tax due from the estate. IRAs and retirement accounts which were pretax accounts, are inherited by a spouse who can then either treat the accounts as her own, i.e. even co-mingle with current IRAs, or treat as inherited IRA, and begin RMDs. In which case tax is due to the extent the money wasn't already taxed.

I see the edits above. No tax should have been due. Mom can gift the kids up to $14,000 per year per kid with no paperwork at all. And another $14K to the kid's spouses or grandchildren. Above this number, a form 709 is used to tap into the lifetime exclusion.

As it stands now, it's unclear why any tax would have been due in the first place.

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  • pre-tax disability coverage?
    – littleadv
    Jun 17, 2013 at 18:18
  • Yes, @littleadv, that makes sense. But wouldn't it have been taxed when the dad received it? It sounds like it was set aside but the family only got it on his passing? My answer on the further transfer from Mom to kids is still useful to OP.
    – JTP - Apologise to Monica ♦
    Jun 17, 2013 at 18:22
  • I wish I could give additional detail, but my mom doesn't know anything about it just that she received money from his death and she's the type not to share any financial information to anyone. The company my dad was working for no longer exists. My dad was the "owner" of the funds, but he was in a vegetative state, so it was handled by someone (don't know who...)
    – Anthony Miller
    Jun 17, 2013 at 18:22
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    If the funds were already his, there should have been no tax due for the inheritance, as @littleadv accurately pointed out, if the funds were from a disability payment, with premiums paid by employer, your dad might have owed tax, and this is what was settled on his passing.
    – JTP - Apologise to Monica ♦
    Jun 17, 2013 at 18:40

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