signing over settlement. tax implications?

What is the name of your state? ny

My friend has been in court and won a huge settlement, I was told in the litigation forum here that it can be assigned over to a loved one or anyone. So the question is what are the tax implications? Can she just sign it all over to someone and then they take care of the regular taxes or does it have to go over as a gift tax with the bigger tax penalties of that? Also she hasnt recieved it yet but will soon. Thank you!

[abezon]

Signing over the settlement works if the case is not settled yet. Then you're only giving away a possibility of money with little value. Now that she has an award, she will have to file a gift tax return. The recipient will not pay any taxes, but she will remain responsible for any income taxes due on the settlement. (Depending on what the award was for.)

Its in her name yes but she hasnt recieved it yet but it is coming very soon. So the only way she can turn it over to someone else is to go the gift tax way? she cant just assign it over and not use that huge gift tax penalty? Even if she doesnt have it yet and its just in her name as of now? Gift tax is huge... thanks for your help!

[abezon]

It's now a known amount, so she has to file/pay gift tax. Why would she want to give it away anyway? The whole point of suing the defendant was to get money.

If she wants to give some away, she should wait until she's filed her tax returns, since we don't know how much is taxable at this point.

hi, thanks**************Health reasons is the number one issue. There is still some arguing goin on and she cant go through that anymore. so if it is for medical reason does she still have to use the gift tax scenario? or just reassign it over without her having any tax issues and then the new recipient taking over regular tax responsibilities? Thanks

[abezon]

Nope, no medical exception. Why not set up a trust fund to pay her expenses? Then someone else can deal with the money once she receives it.