Inheritance and Health insurance subsidies

[Kurt V. Ullman]

My daughter is working part time and going back to school and thus
qualifies for rather hefty subsidies under Affordable Care Act. She is
about to get an inheritance of $16,000-20,000 and was wondering if that
would count in figuring up is she owed taxes, etc. at the end of the year.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>

[Stuart Bronstein]

"Kurt V. Ullman" <kurtu...@yahoo.com> wrote:

> My daughter is working part time and going back to school and thus
> qualifies for rather hefty subsidies under Affordable Care Act.
> She is about to get an inheritance of $16,000-20,000 and was
> wondering if that would count in figuring up is she owed taxes,
> etc. at the end of the year.

Inheritances and gifts are generally not included in taxable income,
unless they come from an IRA or other qualified plan for which income
tax had not yet been paid by the donor.

As far as the Affordable Care Act, my recollection is that subsidies
are based on taxable income, not on accumulated assets.

--
Stu
http://DownToEarthLawyer.com
https://www.etsy.com/shop/studiobethdesigns

[Kurt V. Ullman]

On 8/15/16 12:13 PM, Stuart Bronstein wrote:
> "Kurt V. Ullman" <kurtu...@yahoo.com> wrote:
>
>> My daughter is working part time and going back to school and thus
>> qualifies for rather hefty subsidies under Affordable Care Act.
>> She is about to get an inheritance of $16,000-20,000 and was
>> wondering if that would count in figuring up is she owed taxes,
>> etc. at the end of the year.
>
> Inheritances and gifts are generally not included in taxable income,
> unless they come from an IRA or other qualified plan for which income
> tax had not yet been paid by the donor.
>
> As far as the Affordable Care Act, my recollection is that subsidies
> are based on taxable income, not on accumulated assets.
>

Thanks.

[Alan]

On 8/15/16 9:13 AM, Stuart Bronstein wrote:
> "Kurt V. Ullman" <kurtu...@yahoo.com> wrote:
>
>> My daughter is working part time and going back to school and thus
>> qualifies for rather hefty subsidies under Affordable Care Act.
>> She is about to get an inheritance of $16,000-20,000 and was
>> wondering if that would count in figuring up is she owed taxes,
>> etc. at the end of the year.
>
> Inheritances and gifts are generally not included in taxable income,
> unless they come from an IRA or other qualified plan for which income
> tax had not yet been paid by the donor.
>
> As far as the Affordable Care Act, my recollection is that subsidies
> are based on taxable income, not on accumulated assets.
>

The Premium Tax Credit (the subsidy) is based on Household Income which
is Modified AGI. Modified AGI is AGI plus any excluded foreign earned
income, tax-exempt interest and any social security benefit that is not
already included in AGI. SO... for someone who is single and not
collecting social security nor earning any compensation from a foreign
source, it is AGI plus any tax-exempt interest.

As Stuart said, the inheritance would only be included in AGI if it had
its source from a retirement plan or annuity that would have been
taxable to the decedent had the decedent taken the distribution.

[Kurt V. Ullman]

On 8/15/16 1:44 PM, Alan wrote:
>
> As Stuart said, the inheritance would only be included in AGI if it had
> its source from a retirement plan or annuity that would have been
> taxable to the decedent had the decedent taken the distribution.
>

Thanks. This is out of a trust that my Dad left the kids when he died
about 28 years ago. My step-mom got the income until she died (which was
last week), so there shouldn't be any taxes for the decedent.

[BignTall]

On 8/15/2016 2:58 PM, Kurt V. Ullman wrote:
> On 8/15/16 1:44 PM, Alan wrote:
>>
>> As Stuart said, the inheritance would only be included in AGI if it had
>> its source from a retirement plan or annuity that would have been
>> taxable to the decedent had the decedent taken the distribution.
>>
> Thanks. This is out of a trust that my Dad left the kids when he died
> about 28 years ago. My step-mom got the income until she died (which was
> last week), so there shouldn't be any taxes for the decedent.
>

A liquidating distribution from a trust, (particularly one that old)
may include some capital gains which may be taxable to your
daughter and possibly reduce her health insurance subsidy. It is
also possible that the trust could receive some other income after
the step-mom died (i.e. dividends, interest) that would be allocated
to your daughter.

The trust should eventually send her a form K-1 (just like they did
to the step-mom for the last 28 years) with all the capital
gains and income information needed to calculate taxes but that may
not happen until next spring. If you want to get estimates of
capital gains and income amounts before then, you will need to
ask the trustee of the trust. The trustee may or may not be willing
and able to help.

Condolences and Best Wishes.