Can you transfer inheritance money with out paying a gift tax?

2 answers | Last updated: Sep 22, 2016
A fellow caregiver asked...

My brother and I are the beneficiaries of my Grandmother's estate. I currently don't have a bank account because of several creditors. I was about to file bankruptcy when Grandmother died. The total value is $100,000. We plan to get the check in both our names and deposit into his account. Will he be able to transfer money to me without paying Gift Tax?

Expert Answers

You want to know if your brother would be liable for federal gift tax if he legally transferred half of a $100,000 inheritance deposited in his bank account to you. Technically, the answer is yes, he would be liable for gift tax. However, no gift tax would actually need be paid, because currently there is a personal gift tax exemption for (total) gifts amounting to less than $5 million. [This is actually a combined exemption for gifts and property left on death.]

I cannot speculate on what would happen if your brother simply paid you the money and did not file a federal gift tax return. Perhaps nothing would happen. The IRS might never learn of the transaction. If somehow the IRS did learn of it, your brother might be liable for penalties and interest.

I also cannot evaluate what would happen if your creditors and/or a bankruptcy court learned that you had inherited $50,000 but manoeuvred the money through your brother's bank account. They would likely go after the money

Community Answers

Picasa answered...

I have my accounts with my children's name as "in trust" on the accounts. When I die, they automatically get the accounts. They cannot get the money while I am alive but their names are on the accounts and it will pass to them after I die without a tax. My attorney says this is legal. And I am not rich so it is under the max amount.