i received a lump sum death benefit from my aunt who passed october2021. she was 90. is there a death benefit exclusion

[hilliarddebbie]

I received a death benefit  payment from  my 90 year aunt who passed October 2021. Is there a death benefit exclusion

[FangxiaL]

You don't need to include it on your tax return. Inheritance is considered tax-free income unless the payment is from a retirement plan.

[hilliarddebbie]

The death benefit was from her pension retirement plan. Please help!

[RaifH · Accepted solution]

No, there is no death benefit exclusion for payments from your aunt's pension. Please see the Inherited IRAs and Retirement Accounts section of this TurboTax article. Since the pension is generally funded with untaxed money, the distributions are still taxed, even if it is the beneficiary who receives them. 

The 1099-R for the distribution from your aunt's pension should have the information required to accurately report this on your taxes. The entire distribution might not be taxable if your aunt had any employee contributions with after-tax dollars. The code in Box 7 should be a 4. 

[hilliarddebbie]

The death benefit was from a pension retirement plan

[HelenC12]

@RafiH is correct. There is no death benefit exclusion. 

Per IRS: Death benefit exclusion: If you were the beneficiary of a deceased employee (or former employee) who died before August 21, 1996, you may have qualified for a death benefit exclusion of up to $5,000.

• The beneficiary of a deceased employee who died after August 20, 1996, won't qualify for the death benefit exclusion.

[fanfare]

@hilliarddebbie 

perhaps the executor paid any tax due.

Check with the executor.

A helpful executor will inform you of what you have to do.