Are there any tax consequences arising if a beneficiary gifts her share of death benefits to sibling?
Question Details: Husband/wife with 2 children, girl and boy, both adults. Wife dies leaving equal shares of a $80,000 life insurance policy to the children. One child lives overseas and does not pay US tax. The other lives in the US. The child living outside the US maintains a US checking account for periodic deposits for the parents' use. This child's share of the insurance has been received and has been deposited. The US child wishes to give her share of the death claim to her sibling. It is understood that each share is non-taxable to the beneficiary, this ? is about the gift from one to the other.
Insurance Law Law Answers
Yes, there can be gift tax consequences. The federal gift tax applies to annual gifts of more than $13,000.00 from any one person to any one other person (which means that a husband and wife, for example, could give each of their children $26,000.00 per year without going over the limit).
So, one simple way to avoid the tax is planned giving, $12,000 each year (leaving that other $1,000 to cover "ordinary" gifts over the course of the year), with a $4,000 payment in the fourth year to finish it out (along with accrued interest, if you want to worry about that).
What the receiving child's country of residence would do about this gift, I have no idea.
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