Q: Death benefit comes to you and I believe nonaxable. You now decide to transfer some to your child is that then taxable?
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A:
When you receive a death benefit that is considered nontaxable, it indeed comes to you without the obligation to pay income tax on that amount. If you then decide to transfer a portion of this benefit to your child, the transfer itself can be considered a gift. In the United States, there are specific rules regarding gifts and how they are treated for tax purposes.
If the amount you transfer to your child is under the annual exclusion limit, there is no need to report it or pay taxes on it. If it exceeds this limit, you'll need to file the appropriate forms, but it's unlikely you'll owe any taxes unless you've exceeded the lifetime exemption. It's always a good idea to consult with a tax professional or financial advisor to understand the specifics of your situation and ensure you're complying with all relevant tax laws.
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