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My mother is receiving a medical malpractice settlement check of approximately $400,000. She doesn't know how to manage her finances and would like her son to manage the finances. I believe the settlement is not taxable. Can she sign that check and deposit it into my account? Will taxes have to be paid or will a gift tax be filed?


The BIDaWIZ Team's Answer:

Is the medical malpractice suit due to physical injury or connected thereof? If so, then the settlement is not taxable to your mother. Please note that amounts other than punitive damages received on account of personal injury or wrongful death are income tax-free to the recipient, including that person's estate or heirs. As for as gift tax reporting, the annual exclusion is set for reporting purposes. Meaning if your mother's gift exceeds the annual limit of $14,000 for the 2013 tax year; $28,000 if she's married and filing jointly, then she has to file a gift tax return or form 709. However, she doesn't have to pay taxes as the lifetime exclusion is $5.25 million for single filers and $10.50 million for joint filers. If the gift exceeded those amounts, then she would be subject to taxes. Again, if a donor's gift exceeds the annual exclusion, they need to file the gift tax return, but they won't have to pay taxes unless they give more than the lifetime limit.

The BIDaWIZ Team



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