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My father passed away and left my mother a life insurance

Customer Question
policy. She would like to...
My father passed away and left my mother a life insurance policy. She would like to split the money between myself and my brother. Are there tax implications attached to receiving this money?
JA: What state are you in? It matters because laws vary by location.
Customer: Oregon
JA: Has anything been filed or reported?
Customer: How do you mean?
JA: Anything else you want the lawyer to know before I connect you?
Customer: No
Submitted: 6 months ago.Category: Tax
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Answered in 7 minutes by:
5/12/2017
Tax Professional: emc011075, Tax adviser replied 6 months ago
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,235
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

Generally life insurance proceeds are not taxable, unless the life insurance is a distribution from a trust or annuity. Than it could be taxable.

If she wants to share the proceeds with you and your brother there are no tax implication or filing requirements to you or your brother, assuming she is US citizen. If she gift you more than the 14K annual exclusion she will need to file a gift tax return. But there's also life time gift tax exclusion currently at 5.5M. It means that you mother can gift over 5M during her lifetime without having to pay a gift tax. All she needs to do is to file an informational gift tax return.

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Tax Professional: emc011075, Tax adviser replied 6 months ago

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

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Customer reply replied 6 months ago
Last question. The 5.5M Lifetime gift. This can be given anytime in her lifetime? It does not matter if it's given in one year or over 20 years as long as she files the informational gift tax return? Do I understand that correctly. The key is to file that gift tax return after exceeding 14 K right?
Tax Professional: emc011075, Tax adviser replied 6 months ago

That's correct. Lifetime exclusion can be used any time during ones lifetime. The 2016 lifetime exclusion was 5.45M, 2017 exclusion is 5.49M. It goes up by few hundred thousands every year. It is same as the estate exclusion. If she gives you or your brother more than 14K any given years she needs to file a gift tax return to keep track of her lifetime gifts.

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