Pension Taxes

Pension Taxes

My mother recently passed. She left me as the sole beneficiary of her retirement pension. I should recieve half of her pension monthly. She requested that I split it half way with my brother. Will I be liable for claiming the portion that I have given him when tax time comes around? Is there a way to write it off of my taxes?


Call as probate attorney in your area and see if you can disclaim (renounce, formally decline) part of the benefit and if that is done if it will transfer to your brother. The result might be unlikely to achieve but if you could it might solve the issues you face. Since you were the heir, speak to your accountant about whether there are any options or planning steps you might benefit from (e.g., elections or options under the plan). If the payor of the pension is a large company they may have an HR (human resources) department that might be able to provide information to you. If the request that your mother made was merely a non legally binding verbal request, you would have to report the income from the pension on your return. The amount you transfer to your brother sounds like a gift from you to him so if it exceeds the amount you are allowed to gift annually $13,000 in 2009, you might have gift tax implications as well.

Get professional help ASAP to see if there are still steps you can take.

If you cannot resolve the situation and you have to report the full amount on your income tax return, then if this is only a moral commitment (which is what it sounds like) you should probably gift your brother half of the NET of tax amount you receive, not 1/2 the full or gross amount. Otherwise he'd be getting 1/2 and if you were in a high tax bracket you could be paying most of your 1/2 in taxes. Doesn't sound like that is what your mother would have intended.

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