Is It Your WILL to Tax Your Beneficiaries to Death?

Q. I have inherited my mother's estate. She died in May of 2005.

Her Will clearly states that she expectes me to share the estate with my brothers and sisters, share and share alike.

What are the tax implications for my brothers and sisters who will be receiving these gifts?



A. This is a wonderful question!

If I understand correctly, your mother named you as the sole beneficiary of her estate. When she died, you inherited everything.

Even though she gave you all the money, it was expressed that she expected you to share and share alike with your siblings.

This is a terrible way to do things. If your mother wanted her estate divided between her children, why didn't she just say that in the Will? By not doing so, she has greatly increased the potential for hurt feelings and damaged relations that can last for generations. There are also tax implications that she wasn't even aware of.

First, the money is legally yours and you aren't under any legal obligation to give any of it to anyone. It is yours to do with as you please.

If you chose to gift money to your siblings you can, but you must beware of the tax implications. You can't gift more than $11,000 per year to any one person without it being subject to federal gift taxes. If you siblings are married, that means that you can gift $11,000 to your sibling and $11,000 to their spouse each year without any gift tax consequences. That's on the Federal level.

Although you can gift $11,000 on the Federal level doesn't mean there won't be any taxes on that gift. You need to check with your state to see what their gift tax laws are. For instance, in Tennessee where I live, the state only allows gifts of $10,000 per person. If you gift $11,000 then the state wants 6% of the amount over $10,000.

That means it may take you years If you want to gift a larger amount, whereas that money could have gone to your siblings quickly and easily if it was done through your mother's will.

Another way of achieving this would be for you to disclaim the portion of your inheritance that you wanted to go to your siblings. In most states, the laws of intestate succession state that the portion you said you didn't want will be divided equally between your siblings. It's too late for that.

Your mother has unwittingly and unnecessarily put you in a difficult position. While this is unfortunate for you, your questions may help others make wise decisions regarding their wills before it is too late. Thanks for asking.

Your posted comments on this and other questions are welcome.
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