How can I redirect my inheritance to my mother?October 4, 2012: 6:30 AM ET
My grandparents recently passed and left some money to me in their will. I want to give it to my mother, who needs it more than I do. I don't want to claim it as taxable income if I don't have to. What should I do? — Name withheld
Bequests normally don't count as taxable income, says Lisa Featherngill, CPA/PFS, managing director at Abbot Downing in Winston-Salem, N.C. They can trigger estate tax, but that would be paid by the estate and wouldn't affect your income taxes.
You may face gift tax issues, but they're probably a concern only if you're wealthy. Say you receive the inheritance and give it to your mother. If the amount exceeds the annual gift tax exemption of $13,000 ($26,000 if you're married) you'll have to file a gift tax return. Any amount in excess of the $13,000 (or $26,000) annual limit will be credited against your lifetime gift tax exemption, currently set at $5,120,000.
Using up your lifetime gift tax exemption means you'll pay tax on all subsequent gifts, and the full value of your estate will be taxed before it goes to your heirs. This isn't likely to be a problem unless you're very well-off. If that's the case, eating into your lifetime exemption may limit your estate planning options in the future.
What if you are wealthy? You can disclaim the inheritance, but it will pass to your mom only if she's named in the will as the next person in line to receive it. You can talk to the attorney in charge of the estate to confirm if that's the case. If so, the next step would be to send a letter to the executor of the estate officially disclaiming your inheritance.
— Marc Mewshaw
Got a question for the Help Desk? Send it to email@example.com.