Taxes

[Crazy894509]

My mother passed away 2024 and left me and my brother around 120k in savings account my father took the money from her account and transferred it over to his savings and then signed over two cashier checks with the amount split up into two for me and my brother which was done January 2025. There is no will or living trust and this was by my mom’s word of mouth while she was alive and told my father told money was for me and my brother. My dad is worried now that he would have to pay taxes on this money he gave me and my brother. My question is do we have to pay taxes on this money? It was in my mother’s savings regular savings account and not in any special account. We reside in California. Sorry for the confusion I read my post and realized I put wrong dates. I updated with the correct dates.

[Opus 17]

If there was no Will, then the money was inherited according to the laws of intestacy in your state.  In California, that means your father inherited all his wife's community property, and 1/3 of her separate property, with the children inheriting the other 2/3 of her separate property.

Let's assume two different scenarios.

1. The savings account was community property.  In this case, the husband inherited it all.  Inheriting cash is not taxable.  Then, he made a gift of $60,000 to each of his children.  Gifts are not taxable to the recipient.  For a gift over $15,000 in 2021, your father was required to report the gift on a gift tax return form 709, but no gift tax is owed unless his lifetime total of estate and gifts is more than about $13 million.

2. The savings account was your mother's separate property.  In this case, you, your brother and your father each inherited $40,000.  Inheriting cash is not taxable.  Then, your father made a gift of $20,000 to each of you.  The gift is not taxable but should have been reported on form 709 since it was more than $15,000.  However, if you or your brother is married, your father could give $10,000 each to you, your brother, your spouse, and your brother's spouse, and that would not be reportable since each gift was under $15,000.

The difference between community and separate property is a bit too complicated for a short form answer.  And, if there were other assets that were your mother's separate property, you might have been entitled to a share of them as well.  That can get complicated, and if you are concerned, you would need to see an attorney.  

Failing to file a gift tax return is subject to penalty, but the penalty is a percentage of the tax owed, which would be zero as long as your father's estate and lifetime gifts are less than $13million.  If he is worried, he can file a 2021 gift tax return now.  The form is separate from the tax return, so there is no need to amend his regular tax return.   Search the IRS web site to download the forms and instructions for the 2021 version of form 709. 

[Opus 17]

And ask your father to make a will.  It will make his passing much easier on you and the rest of the family.  It may be difficult to start the conversation, but its important.