Update on my friends death benefit payment

Why does her sister get half, and she is stuck with the taxes?.

Isn't there a gift tax? I would think that your friend would have to pay the tax on the entire amount and her sister will have to pay if she is liable. Doesn't seem right that both have to pay. I would call H&R Block and ask them how this works for sure.

being that Matt is an accountant if she was leaving in Quebec he would know but not there. Tell her to go to a tax firm to get her income tax done.

I'm no insurance expert but here's what I would do if I knew taxes were due on that interest payment. I'd put the interest aside - in a bank (let it grow some more interest...lol). Then, at tax time, whatever is due for taxes on that interest, pay out of it. Then split the rest. Or - I believe you can "prepay" the interest. Call the IRS - do it now, and then split the difference.

There were two checks issued. One for $2,034 and another for $1,000. Each beneficiary was issued their own separate checks. If the sisters want to split the additional $1,034, that is up to them. But, when tax time comes the sister who was issued the $2,034 will have to claim that amount and pay the back taxes accordingly as will the other sister who received $1,000. The difference in monies ($1,034) whether split between the sisters or not, CAN NOT be split at tax time. Each sister has to pay taxes on the exact amount of each check they themselves received. Now, if sister number 2 is willing to pay the difference at tax time to sister number 1 they can make that transaction on their own. It CAN NOT be done through the IRS and tax filings. This could be complicated and messy. On the other hand, Dad may have done the split this way for some reason or another. The one that comes to mind is that sister number 1 may be the executor who would automatically receive a percentage agreed upon when the policy was taken out and the will was set up. That most likely is why sister number 1 received more than sister number 2. Now it is up to the two sisters to decide to leave matters as is or make amendments on their own. Good Luck!

I am glad she got something for the wait

I'm no insurance expert but here's what I would do if I knew taxes were due on that interest payment. I'd put the interest aside - in a bank (let it grow some more interest...lol). Then, at tax time, whatever is due for taxes on that interest, pay out of it. Then split the rest. Or - I believe you can "prepay" the taxes on the interest. Call the IRS - do it now, and then split the difference.