The Griffins were driving in a snow blizzard when a truck hit them as it was sliding off the road....

Question

The Griffins were driving in a snow blizzard when a truck hit them as it was sliding off the road. The truck driver received minor injuries, but Wanda and Frank Smith died at the scene of the accident. Amy, their eight-year-old daughter was in the back seat and seriously injured. Amy will eventually recover, but it will take a long time and there will be some lasting physical damage. Frank and Wanda have a will that leaves all their assets to Amy. These assets include their house and its contents, investments, traditional IRAs, 401(k) retirement funds, and a life insurance policy with Amy as the beneficiary. In case of their death, Wanda’s only sister, May, is to be guardian of Amy. Frank and Wanda request a trust to be set up for Amy to control the money she will receive.

May filed a lawsuit against the driver of the truck, the company for which he works, and against Frank and Wanda’s car insurance company. The accident was determined to be 90 percent the fault of the truck driver and 10 percent the fault of Frank, who was driving. The jury awarded Amy a large sum for the death of her parents and to cover Amy’s current and future medical costs. Also received were amounts to cover the medical and funeral costs for Wanda and Frank. Amy received compensation for any mental anguish and for the partial loss of use of her right hand and arm. May was awarded a sum for the loss of her sister, Wanda.

Robert · Accepted Answer

Case Situations 
 
The tax treatment in this case is related to two things first is related to the compensation received 
by May for loss of his sisters and compensation and inheritance received by the May. Since, May 
is immediate son of her parents, so this is the important aspects in this case as entire money 
received by Amy will be treated as inheritance. However, May will be charged for her portion 
that she received as compensation. Hence an important aspect in this case is inheritance and 
estate tax, distinction between two and the tax implications arise from it. 
Estate or Inheritance Tax and their differences 
 
May will have to understand that an estate or inheritance tax is a duty paid by an individual who 
after the death of the legitimate owner inherits his property or a levy or money on 
the estate (property and cash). International tax rule differentiates between an inheritance tax and 
an estate tax— an inheritance tax is assessed on the legacies received by the estate's 
beneficiaries, while an estate tax is assessed on the assets of the deceased. An inheritance duty is 
state duty paid by you when you get property or cash from the deceased person’s estate. 
Dissimilar to the government estate duty,

The Griffins were driving in a snow blizzard when a truck hit them as it was sliding off the road. The truck driver received minor injuries, but Wanda and Frank Smith died at the scene of the...

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