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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1846
Experience:  Certified Public Accountant
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My wife passed this year. She had a small pension of which

Customer Question

My wife passed this year. She had a small pension of which my son and daughter were its beneficiaries. I believe the IRS allows one-time gifts as a deduction. Can my children gift me the retirement annuity? (I believe the answer is no). However, can they gift me the present value of the annuity, with the proceed deposited to my account which would be constant and deposited to monthly to my account. We situation was nerve considered when we wrote our will. We both just left everything to our children. Which other than this small pension, has worked out well.
JA: The accountant will know how to help. Is there anything else the accountant should be aware of?
Customer: Thanks Paul
Submitted: 7 months ago.
Category: Tax
Expert:  Mark Taylor replied 7 months ago.

Hi Paul, I am sorry for your loss. My name is Mark. I will be happy to help you with your questions. Please give me a moment to prepare your response.

Expert:  Mark Taylor replied 7 months ago.

Do you know what type of pension your wife had? How old was she when she passed away?

Customer: replied 7 months ago.
Sandy was 71 when she passed. The pension was from SunTrust and totalled approximately $600 per month. Her election, at the time, was that she would receive this amount for life and her beneficiaries would continue receiving her payout for a period of 5 - 6 years. She had other elections such a lump sum, or a larger annuity for a limited time.
The reason for the question it that my children will be taxed at their MARGINAL rates. Whereas, since I am only on social security my tax rate will be minimal or nothing. My children have already set it up so that my wife’s retirement benefits are being deposited to my account. Is there any way to have my children taxed at lesser amount? Sorry for my typos and errors!
Customer: replied 7 months ago.
Also, how does this benefit differ from an insurance payout? She paid hidden premiums (by receiving a lesser amount) by electing a program that if she died before a certain date, she would leave a small legacy to her survivors (my son and daughter).
Expert:  Mark Taylor replied 7 months ago.

Let me address your question regarding the life insurance. In most cases life insurance proceeds would not be taxable.

Unfortunately, you would not be able to transfer the tax liability of the pension. At $600 a month, the amount fall below the requirement ($14,000 annual exemption) for filing a gift tax return.

Expert:  Mark Taylor replied 7 months ago.

Did you agree for the children to become beneficiaries of the pension account?

Customer: replied 7 months ago.
Of course, I had no idea any problems would be created.
Expert:  Mark Taylor replied 7 months ago.

I figured that you did but wanted to verify to be sure. Unfortunately the pension would be taxable to the children. The pension could be directed to withhold at their marginal rates with the remainder going to your account.

Customer: replied 7 months ago.
I knew that.
Expert:  Mark Taylor replied 7 months ago.

Unfortunately there would be no way to shift the income to you.