IRS Form 1099S

[4ehano]

In 2025 we paid 2 family members a large sum of money to settle an estate pay-off that was documented with an attorney. Do we/should we issue a form1099S or some other form1099 to the in-laws? And how do we go about issuing the form to the IRS?

[pk]

@4ehano , what form ( if any ) you have to use depends on the exact facts and circumstances -- so please elaborate ( what was the payment for , why etc.).    For example  when an estate of a decedent disposes off assets and/or distributes  assets/monies etc. to the inheritors, there is generally no reporting requirement  ( depending on the size of the estate ) -- no inheritance tax.   Obviously there are many situations when a transfer of funds must be  reported because  it is taxable income to the recipient.

Will circle back once I hear from you 

[4ehano]

When my mother in law passed away, my wife and her eldest brother were on title for the properties. The two younger brothers, who got nothing, felt the they were intitled to "something". The four siblings met and agree to terms where sister and older brother would pay the two younger brothers an agreed upon amount of money (+$150K). They all meet at an agreed upon attorney and it was put to paper and signed by all in attendance.  In 2025, my wife and I mortgaged our house to pay them what was due!

So, does form1099S need to be issued to them as income to then from the settlement or some other form1099?

Looking for advice on how to proceed.

Thanks

[pk]

@4ehano , 

As I understand your situation ( thank you for answering my questions):

(a) Two of the  four siblings were on the deed of the property prior to the passing of the decedent --- note that if that is the case then   depending on how the actual language of the deed, there may be no step-up ( at the passing of the decedent ) and all or none of  the asset may be part of the estate.  Please check with your lawyer and/or inspect the  documents involved

(b) For familial reasons the other two  siblings  ( those not on the  deed ) have been given a cash  "gift / inheritance " by the  "owning" siblings.

Thus , and assuming that there is nothing of value being provided  by the recipients in exchange ,  this is a  case of inheritance distribution or a gift. 

(1) If the lawyer determines that this is an inheritance sharing then there is NO form to be filed -- no 1099s etc.  Please see the exact language in the agreement.

(2)  If this is a gift by one / more  donor to another  donee then the donor  may need to file a form 709 recognizing the gift ( above the free annual limit per donor per donee ) and this will count against the donor's life time  gift/estate free amount.

Personally I think this is a sharing of in heritance and therefore needs no filing.  IMHO

Is there more I can do for you ?