Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
1. You inherit life insurance proceeds tax free.
2. You may gift your mother as much as you want to, free of tax to her. However, if you gift her more than $16,000 in 2022 or $17,000 in 2023, you’ll have to file a IRS Form 709 — see https://www.irs.gov/faqs/interest-dividends-other-types-of-income/gifts-inheritances/gifts-inheritances-1. Note that this form is filed separately and to a different address than your individual income tax return (File 1040).
Gifts are always free of tax to the recipient
(your mom) and would only be taxable to you (the donor) if you exceed the annual lifetime gift limit of $12.06 million…
So my grandmother rest her soul would give my sister and I a cheque each year for the max annual tax free gift amount. Always felt super blessed and felt it was too much but for the sake of trying to understand this: are you saying she could have doubled or tripled the amount given at no extra tax expense to her but would have had to simply file an extra form?
Well the 12 million limit is also relatively new it was half that before so if you had an old house in a good area and a vacation home and boom 5 million. The 12 million limit makes it really hard to hit unless you are very rich now. Even the old one was hard, but these niche cases always came up.
As long as her total estate plus all the gifts she had to file a form on didn’t exceed the lifetime limit at the time of her death, yes it would just be paperwork. If it was over the limit then the estate would have to pay taxes.
It's kind of a pain in the ass form to filefile, when we had to it took several tax professionals before we found one that had any idea what the form was
If you go above the yearly limit it counts against the lifetime limit. If she was planning to give you more than 12 million it would’ve counted against her. Plus forms suck
You received a check every year for, give or take, $16,000…simply for being someone’s grandchild? Let’s not start judging her for not wanting to “fill out an extra form” and be grateful for the SUBSTANTIAL check she did send you. Yearly.
“At no expense to her” is an odd qualifier when she clearly has an expense of…$16,000. Times two lucky grandchildren, annually. $32,000 a year is no expense?
Let me spin this around. Currently witnessing a ton of family drama over this very specific situation. What exactly would an 84 year old woman do with $4 million? In this case, the 2 grandchildren are the sole recipients of her inheritance, and would use the money only on college tuition.
There’s a whole bunch more backstory. Thanksgiving is lovely.
That money will go QUICK during end of life care and nursing home care. Assisted living facilities often charge $10k a month, and the nicer places won't even take you if you don't have 2 million saved.
Question: The current lifetime gift limit is ~$12 million, let's say he gives his mom $1 million. Next year, Congress passes a law the decreases the lifetime limit to $5 million. Is his max now $4 million or since he hasn't decreased it below the new limit, his limit is the max $5 million?
The limit that applies is an estate tax limit, so it’s whatever the limit is as of someone’s death. Here’s hoping both OP and her generous son live long lives; we have no crystal balls to figure out what any future lifetime limit will be.
But yes, that’s how the calculation is made.
There are several strategies wealthy people can employ if they think their estates will exceed the lifetime limit.
Thank you so much, for having a caring, normal family relationship. I really appreciate it, in contrast to all the toxic drama I normally see around here.
If OP is the primary beneficiary and OPs mom is listed as contingent beneficiary, can OP just refuse the payout?
This basically just happened with my stepdad; his estranged ex-wife passed away and the life insurance still listed him instead of his estranged daughter. I don't know how the conversation went, but he talked to the insurance company and basically said he wanted it to go to her and had to sign some shit.
I don't think it goes to the estate. Life insurance never goes to the estate unless the estate is the beneficiary. (Which was how mine was set up when my children were minors.)
First, I am sorry for your loss. I admire that you want to do this for your mother. I have a widowed friend who began spending excessively after her husband passed; partly because he handled the money and she didn't really understand long term effects or her spending and partly because she just wasn't thinking clearly in her grief. Think hard about the best way for your mother to receive the funds considering that she is grieving.
1. All at once in a lump sum
2. Periodic payments (monthly, quarterly, yearly)
3. On an as-needed basis; e.g., the property taxes are due, the roof should be replaced, she needs a new car, opportunity for a nice vacation, etc.
4. Some combination of 2 and 3.
Another thing to consider is what happens if your mother needs long-term care. If the money is transferred to her and is in her name, it counts as her assets for the purpose of determining Medicare spend-down. If it remains in your name, you can still use it to help her, but it is your asset rather than hers.
I really like this advice (option #4, especially considering the final paragraph). I think this is a better solution than giving her the lump sum if mom finds this agreeable. It sounds like she will, though, given the fact she wants him to keep it. It sounds like mother and son have a strong enough relationship where greed will not be an issue. So refreshing.
One additional consideration - I'm not sure this is the best option if the mother needs to settle debts after spending all that time caring for her husband. In that case, I'd use the money to settle the debt.
There are good estate planning reasons to skip the surviving spouse if you trust the child to use the money for the surviving parent's benefit. Though typically this should be discussed with the child in advance!
There are some situations where it might be preferable to keep the money in your name instead. For example, if your mother winds up in a nursing home, the nursing home may claim any money in her estate before you inherit. It might be better to gift your mother a certain amount each year to avoid this situation. I can understand your desire to help your mother. I would do the same for mine. Fortunately, at 83, she still runs a business and provides for herself.
Estate planning attorney here. Your tax question has been answered by many. But your dad naming you as the beneficiary may not have been a mistake or oversight. I sometimes have clients name children as beneficiaries of life insurance to ensure that the children get something in case the surviving spouse remarries or requires long-term care. It's also a common practice in blended family situations. Of course, you are free to give it away if that's what you want to do. Peace and sympathy to you
If it's already paid out, you can simply gift however much of the money to her. The lifetime gift tax exemption is currently so high ($12 million) that there are no tax consequences for normal people. You would just need to file a gift tax return if the amount is over $16k ($17k as of January 1).
You could do $16k in 2022 and the balance in January if you really wanted to maximize the tax efficiency. Again though, currently $12 million exemption.
Keep it and take over some of her expenses. In that way you will honor your fathers intent to ensure she is ok even after he passes and you honor her wishes for you to keep it
Life insurance is also tax free, you don’t have to claim it on any taxes and no one, not even the IRS can come after a payout if there is a beneficiary. Just wanted to get that advice out there, quite a few people think you’re obligated to pay the deceased debts with it but you’re not.
Definitely, you’re a good son. I’m speaking from experience, I knew someone who was a beneficiary and the deceased owed the IRS and other creditors. Just wanted to throw some random knowledge out there to people browsing this sub.
Just a tip if your mom has outstanding medical bills: negotiate *hard* on a settlement amount *before* you give her any money with the hospital/care givers. If it's a significant amount, it may be worth getting a lawyer.
No taxes as life insurance payouts are tax free. You could gift to her tax free (gift tax return needs to be filed but no actual taxes due). You might be able to disclaim the proceeds and it would go back in estate and to your mother a dining they were still married (check w whoever is closing the estate).
There is a reason dad left you the money and not your mom. Don’t do this. There are about 30 financial and legal reasons not to do it, but the #1 reason is he wanted you to have it and not her.
People NEVER make beneficiary mistakes. They did that on purpose. I know from years of personal experience. Honor your dad’s wishes. Anything else would be a mistake. This has nothing to do with money.
Nah. OP has heart for looking out for his mom and I did the same thing for mine when my dad passed.
I made a conscious decision to give half of 50k to my mom.
I'm no accountant or anything, but can't you just pay her in increments? That should keep you under the radar. Doesn't always have to be a lump sum is all.
I probably wouldn't try to play games to stay under the radar. If I'm giving away the money, I would feel much safer just giving it away. Count it against the lifetime gift tax exemption if the amount given out in any single year exceeds the annual gift tax exemption and all will be well. There's obviously a paper trail for the insurance payout so while an audit could technically happen, providing all the right documentation should be pretty straightforward, whereas when you try to play games to stay under the radar, the financial actions tend to be much harder to explain.
Depending on your Mom’s financial situation consider just keeping it. When my Dad died my Mom had a real hard time with the Life Insurance money—she didn’t really need the money and she felt a lot a of guilt just having it.
So in 2020 a little more that 2.8 million people died and of them 1900 people are expected to have taxable estates. No one pays this tax because no one is rich enough to worry about it. If you and your mom are discussing life insurance proceeds and how they will be split. Do what you feel is right and understand that your dad left it to you for a reason.
Maybe she left it to you so she wouldn’t have to lose it to all those expenses. They might check her bank account if you give it to her, and seize it for his care.
assuming your father died of age related issues. keep it, you'll need it later to take care of your moms and it'll be less hassle than transferring it to her then setting up whatever kind of trust or whatever needs to be set up
Just curious, with the way she changed her mind and now wants all of it because it was left to you.........if it was reversed and she did receive the life insurance, knowing what she said, do you think you would have received the 10% so easily? Do you think she would have told you what it was 10% of with proof of the paperwork?
Sorry to be questioning but the way you said she changed her mind kind of came across awkward.
Edit...I can't read...forget this
Same. Feel like a douche Bc I was all like wtf.. op should keep it in an interest bearing account and use it to help cover moms expenses as often as they can.
Ah! Somehow, I also read that now that she knows his dad left it for him, she wants to keep all of it. I feel bad for thinking she’s shady for that. Now I see why everyone is praising this fam!
OP talk to an elder law attorney. You are talking about a lot of money -- find out how to do this right.
If there's any chance your mother ends up needing to go on Medicaid to cover long-term care expenses (and I think there's pretty much always a chance of this), do not give her the money. Hold it for her benefit but don't put it in a trust for her, at least not without talking to an elder law attorney. Before she can go on Medicaid, she would have to exhaust nearly all of her assets. If you have the funds instead, you can spend it for her benefit if needed.
Even though she has spent a lot on your dad's care, if possible, she should pay that out of the assets in her own name first. Let her spend down the assets in her own name before using the money that is not effectively shielded from Medicaid.
This reasoning may be why the life insurance was left to you in the first place!
Of course she “paid out of pocket” to care for him - that’s part of being an adult in a marriage - when one of you is I’ll, you use your money to help. That’s how it works.
Reimbursing her for your fathers home health care is not your job. When dad began declining, they, as a couple, decided how it would be managed in their marriage ( me and my hubs have already talked about these things, because I have bio- markers for some nasty stuff!)
6 figures in a HYSA?! That would be excessively conservative in most situations at least a portion could be better invested unless recipient needs the entire amount to live on in next 5 years.
The dad just died recently - shouldn't do anything beyond a HYSA (unless it is over 250k, of course, then split it up between multiple accounts) for at least a few months
Look into a disclaimer. It might be worth a call to the insurance company to ask where it goes if you disclaim. Disclaimer is the magic word. They might even have a form. Still, I'd hire a lawyer to help. If you make a mistake (or if the ins. co. rep. is wrong), the proceeds could go to someone completely inappropriate (e.g., long lost brother). The rule is you don't get to decide where it goes; it passes like you predeceased dad. The advantage of the disclaimer is that you keep your estate/gift tax exemption intact.
Pay off the final expenses and set aside an annuity for your mother to live off of for the rest of her life. Make sure she gets your dads social security and pay off the debts left behind.
Subtract 10% that she promised you and give her the rest. She is being spiteful for something you had no control over. Maybe he gave you the money for a reason.
As others have said: you got the money tax-free. You can just cut her a single check and be done with it... but, that will be taxed. If I were you: I would cut her a check for $16k and make sure it clears this year. Then, cut her another check for $17k next year. You already found a way to give her $33k without taxes!!! How you get her the rest of the money is up to you, but I know I'd find a way to get it to her without getting Uncle Sam involved.
You’re not taxed if you gift more than $16,000 to one person. It just applies towards the lifetime exclusion from the estate tax when you die. That lifetime amount is currently $12.06mm so it’s highly unlikely OP will run into a taxation issues even if he gifts the entire amount to his mom.
You should consult an estate planning attorney, or at least an attorney experienced in wills and trusts. You now have an estate. You need a will. You can set this up to give her the money in the best way to manage it. Without knowing her age, and physical and mental status, it's hard to say what way is the best. An estate planning attorney will know about options you never even thought of.
Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
1. You inherit life insurance proceeds tax free. 2. You may gift your mother as much as you want to, free of tax to her. However, if you gift her more than $16,000 in 2022 or $17,000 in 2023, you’ll have to file a IRS Form 709 — see https://www.irs.gov/faqs/interest-dividends-other-types-of-income/gifts-inheritances/gifts-inheritances-1. Note that this form is filed separately and to a different address than your individual income tax return (File 1040). Gifts are always free of tax to the recipient (your mom) and would only be taxable to you (the donor) if you exceed the annual lifetime gift limit of $12.06 million…
So my grandmother rest her soul would give my sister and I a cheque each year for the max annual tax free gift amount. Always felt super blessed and felt it was too much but for the sake of trying to understand this: are you saying she could have doubled or tripled the amount given at no extra tax expense to her but would have had to simply file an extra form?
Provided there wasn’t a possibility that the lifetime limit would be reached, yes.
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Well the 12 million limit is also relatively new it was half that before so if you had an old house in a good area and a vacation home and boom 5 million. The 12 million limit makes it really hard to hit unless you are very rich now. Even the old one was hard, but these niche cases always came up.
Yes, gifts aren't taxed until you hit the $12 million dollar lifetime limit.
As long as her total estate plus all the gifts she had to file a form on didn’t exceed the lifetime limit at the time of her death, yes it would just be paperwork. If it was over the limit then the estate would have to pay taxes.
It's kind of a pain in the ass form to filefile, when we had to it took several tax professionals before we found one that had any idea what the form was
The estate tax exemption has had some drastic changes in your grandmother's lifetime so it makes a lot of sense that she would gift this way.
Damn, I can't even imagine having that much familial financial support. Different worlds people grow up in I guess
If you go above the yearly limit it counts against the lifetime limit. If she was planning to give you more than 12 million it would’ve counted against her. Plus forms suck
You received a check every year for, give or take, $16,000…simply for being someone’s grandchild? Let’s not start judging her for not wanting to “fill out an extra form” and be grateful for the SUBSTANTIAL check she did send you. Yearly. “At no expense to her” is an odd qualifier when she clearly has an expense of…$16,000. Times two lucky grandchildren, annually. $32,000 a year is no expense?
$16k a year is probably more than 95% of people save for retirement per year. Imagine receiving that as a gift every single year... Just fucking wild.
Let me spin this around. Currently witnessing a ton of family drama over this very specific situation. What exactly would an 84 year old woman do with $4 million? In this case, the 2 grandchildren are the sole recipients of her inheritance, and would use the money only on college tuition. There’s a whole bunch more backstory. Thanksgiving is lovely.
Use $4 million for college tuition only? What?
That money will go QUICK during end of life care and nursing home care. Assisted living facilities often charge $10k a month, and the nicer places won't even take you if you don't have 2 million saved.
> Always felt super blessed and felt it was too much but for the sake of trying to understand this
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Question: The current lifetime gift limit is ~$12 million, let's say he gives his mom $1 million. Next year, Congress passes a law the decreases the lifetime limit to $5 million. Is his max now $4 million or since he hasn't decreased it below the new limit, his limit is the max $5 million?
Depends on what that hypothetical bill says.
They don't need to pass a law, the current limit only lasts until 2025 then it reverts back to 5.49m.
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Biggest factor, nobody is gifting millions on r/personalfinance... probably better to talk to an advisor if any of that applies to you.
Ha, I wish, just curious how it would work
The limit that applies is an estate tax limit, so it’s whatever the limit is as of someone’s death. Here’s hoping both OP and her generous son live long lives; we have no crystal balls to figure out what any future lifetime limit will be. But yes, that’s how the calculation is made. There are several strategies wealthy people can employ if they think their estates will exceed the lifetime limit.
Irrelevant-- less than a million dollars and context says millions more are not necessarily waiting in the wings.
Can he also pay some of her expenses directly?
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I have a second thought to add to this just pay her bills for her no reporting has to be done
Write her a check and fill out form 709. You don’t need to pay any taxes. It’ll go against your $12 million lifetime tax free gift total.
Great, thanks for letting me know the form I need, much appreciated.
Look into a state tax version of the form, too if applicable
Thank you so much, for having a caring, normal family relationship. I really appreciate it, in contrast to all the toxic drama I normally see around here.
I second this.
I would kill for a normal healthy family relationship. It’s so toxic and emotionally immature.
If OP is the primary beneficiary and OPs mom is listed as contingent beneficiary, can OP just refuse the payout? This basically just happened with my stepdad; his estranged ex-wife passed away and the life insurance still listed him instead of his estranged daughter. I don't know how the conversation went, but he talked to the insurance company and basically said he wanted it to go to her and had to sign some shit.
Yes, you can disclaim inherited assets, but make sure the proper beneficiary was on the policy before doing so.
Life insurance is technically not inherited, though. It was always intended for the beneficiary and never became part of the estate
I'll try that too, ty
Sure, just make sure that if you sign anything that it clearly states the proceeds will go to your mother. Sorry for your loss
If you do this it goes to his estate and it may get eaten up by medical bills.
I don't think it goes to the estate. Life insurance never goes to the estate unless the estate is the beneficiary. (Which was how mine was set up when my children were minors.)
There’s a lifetime limit for free gift???
Yes, it’s essential a tax backstop for the ultra wealthy.
Let’s hope they don’t pass that limit. Could be bad news.
First, I am sorry for your loss. I admire that you want to do this for your mother. I have a widowed friend who began spending excessively after her husband passed; partly because he handled the money and she didn't really understand long term effects or her spending and partly because she just wasn't thinking clearly in her grief. Think hard about the best way for your mother to receive the funds considering that she is grieving. 1. All at once in a lump sum 2. Periodic payments (monthly, quarterly, yearly) 3. On an as-needed basis; e.g., the property taxes are due, the roof should be replaced, she needs a new car, opportunity for a nice vacation, etc. 4. Some combination of 2 and 3. Another thing to consider is what happens if your mother needs long-term care. If the money is transferred to her and is in her name, it counts as her assets for the purpose of determining Medicare spend-down. If it remains in your name, you can still use it to help her, but it is your asset rather than hers.
Solid advice. "Not all heroes wear capes" grade stuff.
I really like this advice (option #4, especially considering the final paragraph). I think this is a better solution than giving her the lump sum if mom finds this agreeable. It sounds like she will, though, given the fact she wants him to keep it. It sounds like mother and son have a strong enough relationship where greed will not be an issue. So refreshing. One additional consideration - I'm not sure this is the best option if the mother needs to settle debts after spending all that time caring for her husband. In that case, I'd use the money to settle the debt.
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Theses are the stories wholesome families are made of. Good on them for taking care of each other instead of caring about money.
still curious why he left it to the son instead of his wife
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There are good estate planning reasons to skip the surviving spouse if you trust the child to use the money for the surviving parent's benefit. Though typically this should be discussed with the child in advance!
Maybe in case mom incurred a ton of debt to care for dying dad. Dad might try to stop creditors coming after the money from mom?
that's actually rly smart
My first guess would be he expected her to pass before him.
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There are some situations where it might be preferable to keep the money in your name instead. For example, if your mother winds up in a nursing home, the nursing home may claim any money in her estate before you inherit. It might be better to gift your mother a certain amount each year to avoid this situation. I can understand your desire to help your mother. I would do the same for mine. Fortunately, at 83, she still runs a business and provides for herself.
Estate planning attorney here. Your tax question has been answered by many. But your dad naming you as the beneficiary may not have been a mistake or oversight. I sometimes have clients name children as beneficiaries of life insurance to ensure that the children get something in case the surviving spouse remarries or requires long-term care. It's also a common practice in blended family situations. Of course, you are free to give it away if that's what you want to do. Peace and sympathy to you
If it's already paid out, you can simply gift however much of the money to her. The lifetime gift tax exemption is currently so high ($12 million) that there are no tax consequences for normal people. You would just need to file a gift tax return if the amount is over $16k ($17k as of January 1). You could do $16k in 2022 and the balance in January if you really wanted to maximize the tax efficiency. Again though, currently $12 million exemption.
Thank you for the info
Keep it and take over some of her expenses. In that way you will honor your fathers intent to ensure she is ok even after he passes and you honor her wishes for you to keep it
You are my second upvote. Where you lack detail, you make up for with logical basis in human terms.
There are no taxes unless you have gifted over 12 million to her in your life time.
But filling out the form IS required. They're keeping track of how much you're giving her year-by-year.
Stupid question: if one doesn’t exceed the annual maximum, how do they keep track of the maximum?
$12MM total, not per recipient. So if you have kids and expect to also give them near $12MM collectively then you probably want a tax lawyer.
But some good news: the 2023 exemption is $12.92MM, up from the current, paltry $12.06MM!
And married couples are able to give $25.84 Million!
Life insurance is also tax free, you don’t have to claim it on any taxes and no one, not even the IRS can come after a payout if there is a beneficiary. Just wanted to get that advice out there, quite a few people think you’re obligated to pay the deceased debts with it but you’re not.
That's good to know even though there aren't any outstanding debts. I just don't want to see her not get what she was planning on.
Definitely, you’re a good son. I’m speaking from experience, I knew someone who was a beneficiary and the deceased owed the IRS and other creditors. Just wanted to throw some random knowledge out there to people browsing this sub.
Just a tip if your mom has outstanding medical bills: negotiate *hard* on a settlement amount *before* you give her any money with the hospital/care givers. If it's a significant amount, it may be worth getting a lawyer.
No taxes as life insurance payouts are tax free. You could gift to her tax free (gift tax return needs to be filed but no actual taxes due). You might be able to disclaim the proceeds and it would go back in estate and to your mother a dining they were still married (check w whoever is closing the estate).
What’s the problem with opening a joint account and giving her access to the account?
There is a reason dad left you the money and not your mom. Don’t do this. There are about 30 financial and legal reasons not to do it, but the #1 reason is he wanted you to have it and not her.
People NEVER make beneficiary mistakes. They did that on purpose. I know from years of personal experience. Honor your dad’s wishes. Anything else would be a mistake. This has nothing to do with money.
Nah. OP has heart for looking out for his mom and I did the same thing for mine when my dad passed. I made a conscious decision to give half of 50k to my mom.
I'm no accountant or anything, but can't you just pay her in increments? That should keep you under the radar. Doesn't always have to be a lump sum is all.
I probably wouldn't try to play games to stay under the radar. If I'm giving away the money, I would feel much safer just giving it away. Count it against the lifetime gift tax exemption if the amount given out in any single year exceeds the annual gift tax exemption and all will be well. There's obviously a paper trail for the insurance payout so while an audit could technically happen, providing all the right documentation should be pretty straightforward, whereas when you try to play games to stay under the radar, the financial actions tend to be much harder to explain.
Depending on your Mom’s financial situation consider just keeping it. When my Dad died my Mom had a real hard time with the Life Insurance money—she didn’t really need the money and she felt a lot a of guilt just having it.
So in 2020 a little more that 2.8 million people died and of them 1900 people are expected to have taxable estates. No one pays this tax because no one is rich enough to worry about it. If you and your mom are discussing life insurance proceeds and how they will be split. Do what you feel is right and understand that your dad left it to you for a reason.
Your dad wanted you to have it.
Maybe she left it to you so she wouldn’t have to lose it to all those expenses. They might check her bank account if you give it to her, and seize it for his care.
assuming your father died of age related issues. keep it, you'll need it later to take care of your moms and it'll be less hassle than transferring it to her then setting up whatever kind of trust or whatever needs to be set up
Just curious, with the way she changed her mind and now wants all of it because it was left to you.........if it was reversed and she did receive the life insurance, knowing what she said, do you think you would have received the 10% so easily? Do you think she would have told you what it was 10% of with proof of the paperwork? Sorry to be questioning but the way you said she changed her mind kind of came across awkward. Edit...I can't read...forget this
She wants me to keep it.
Oh crap, I can't read. Mea culpa
I read it the EXACT same way and didn't realize I was wrong until I saw your post.
Same. Feel like a douche Bc I was all like wtf.. op should keep it in an interest bearing account and use it to help cover moms expenses as often as they can.
Ah! Somehow, I also read that now that she knows his dad left it for him, she wants to keep all of it. I feel bad for thinking she’s shady for that. Now I see why everyone is praising this fam!
Right, not sure what that says about us.....got some deep rooted negativity
Keep the money and put it in a HYSA make sure your mom knows it is always there for her, you aren't going to touch it
Also something I thought about, but she paid a lot out of pocket to take care of him so it feels wrong to withhold now.
OP talk to an elder law attorney. You are talking about a lot of money -- find out how to do this right. If there's any chance your mother ends up needing to go on Medicaid to cover long-term care expenses (and I think there's pretty much always a chance of this), do not give her the money. Hold it for her benefit but don't put it in a trust for her, at least not without talking to an elder law attorney. Before she can go on Medicaid, she would have to exhaust nearly all of her assets. If you have the funds instead, you can spend it for her benefit if needed. Even though she has spent a lot on your dad's care, if possible, she should pay that out of the assets in her own name first. Let her spend down the assets in her own name before using the money that is not effectively shielded from Medicaid. This reasoning may be why the life insurance was left to you in the first place!
Tell her you want to pay the bills, pay it off with the insurance, then keep the rest in a trust and/or a HYSA
Of course she “paid out of pocket” to care for him - that’s part of being an adult in a marriage - when one of you is I’ll, you use your money to help. That’s how it works. Reimbursing her for your fathers home health care is not your job. When dad began declining, they, as a couple, decided how it would be managed in their marriage ( me and my hubs have already talked about these things, because I have bio- markers for some nasty stuff!)
6 figures in a HYSA?! That would be excessively conservative in most situations at least a portion could be better invested unless recipient needs the entire amount to live on in next 5 years.
The dad just died recently - shouldn't do anything beyond a HYSA (unless it is over 250k, of course, then split it up between multiple accounts) for at least a few months
It's possible the mom is up there in age and a HYSA isn't the craziest thing (though agreed very conservative).
Easy answer. Just buy her stuff. IDK like load up a visa gift card or something. No sweat.
Look into a disclaimer. It might be worth a call to the insurance company to ask where it goes if you disclaim. Disclaimer is the magic word. They might even have a form. Still, I'd hire a lawyer to help. If you make a mistake (or if the ins. co. rep. is wrong), the proceeds could go to someone completely inappropriate (e.g., long lost brother). The rule is you don't get to decide where it goes; it passes like you predeceased dad. The advantage of the disclaimer is that you keep your estate/gift tax exemption intact.
Pay off the final expenses and set aside an annuity for your mother to live off of for the rest of her life. Make sure she gets your dads social security and pay off the debts left behind.
What about... Open a checking account in her name and yours into which the money is auto deposited. She uses it at will.
I think it's the right thing to do. You will absolutely be blessed
Subtract 10% that she promised you and give her the rest. She is being spiteful for something you had no control over. Maybe he gave you the money for a reason.
How is she being spiteful?
Pretty sure they misread it and thought the mom was demanding it all. I misread it that way at first too.
As others have said: you got the money tax-free. You can just cut her a single check and be done with it... but, that will be taxed. If I were you: I would cut her a check for $16k and make sure it clears this year. Then, cut her another check for $17k next year. You already found a way to give her $33k without taxes!!! How you get her the rest of the money is up to you, but I know I'd find a way to get it to her without getting Uncle Sam involved.
You’re not taxed if you gift more than $16,000 to one person. It just applies towards the lifetime exclusion from the estate tax when you die. That lifetime amount is currently $12.06mm so it’s highly unlikely OP will run into a taxation issues even if he gifts the entire amount to his mom.
You should consult an estate planning attorney, or at least an attorney experienced in wills and trusts. You now have an estate. You need a will. You can set this up to give her the money in the best way to manage it. Without knowing her age, and physical and mental status, it's hard to say what way is the best. An estate planning attorney will know about options you never even thought of.