Author Topic: Gifting from a 403(b)  (Read 87 times)

shortmort37

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Gifting from a 403(b)
« on: November 30, 2022, 09:26:47 AM »
My wife will receive half of my 403(b) upon my death; my two children will receive a quarter each.

In the event my wife precedes me in death, I would like to gift her half to her three children.  I understand that the federal government will claim 20% upon withdrawal.  Will there be any other tax implications, either for me or the recipients?  i.e., will my AGI for the tax year be affected, if I am gifting the entire amount?

shortmort37

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Re: Gifting from a 403(b)
« Reply #1 on: December 01, 2022, 06:43:38 AM »
*BUMP*.  Any takers?

Catbert

  • Magnum Stache
  • ******
  • Posts: 2641
  • Location: Southern California
Re: Gifting from a 403(b)
« Reply #2 on: December 03, 2022, 03:10:26 PM »
Not  a tax professional, but...the money in the 403b is *your* money until you die or withdraw it.  The death of one of your future beneficiaries doesn't give you any special way to circumvent regular withdrawal rules.  If you're 59.5 or older when it happens you can withdraw as much as you want without penalty but still subject to tax.  If you then gift more than the annual gift tax limit (16K in 2022) you'll need to file a form.

BTW when you withdraw you'll owe income tax which could be more or less than 20%.  It's income that will be on top of the rest of your income.  The 20% withholding is just that, withholding and is unrelated to what you'll actually owe when you file taxes.