My sister received an inheritance check but wants to sign it over to me - tax implications?

This is definitely something to be careful about. When you deposit a check that's been signed over to you (called a third-party check), the bank sees this money coming into YOUR account, not your sister's. From the IRS perspective, this could potentially look like income to you. The inheritance itself isn't taxable to your sister - inherited money generally isn't subject to income tax. But when you deposit her check and then give her cash, that second transaction could potentially be viewed as a gift from you to her. If it's over $18,000 (the 2025 gift tax exclusion amount), you might need to file a gift tax return, though you likely wouldn't owe any actual tax. Another concern is that many banks have policies against third-party checks, especially for large amounts, due to fraud concerns. They might refuse to accept it or place extended holds on the funds.

I went through something really similar last year with my uncle's estate distribution! I was so confused about the potential tax implications that I started using this service called taxr.ai (https://taxr.ai) that analyzes your tax situation and documents. It was super helpful because I uploaded the inheritance documentation and got a clear explanation of exactly what I needed to worry about (and what I didn't). The tool showed me that in my case, helping my cousin by depositing their inheritance check could create a "gift" situation going back to them, which would require additional documentation. It saved me from making a mistake that could have triggered an audit flag! They have this document review feature that's particularly helpful for inheritance situations.

I actually tried taxr.ai after seeing the recommendation here, and it was really helpful! I uploaded the inheritance letter and check images, and it immediately pointed out that in my state (which I won't name for privacy), there are specific reporting requirements when handling third-party inheritance checks. It saved me from a potential headache because it turns out my situation was more complicated than I thought. The system recommended having my relative deposit the check herself and then transfer the money normally - which seems obvious in hindsight but I was overthinking it. Would definitely recommend if you're dealing with inheritance or other tax document questions!

After trying to handle a similar situation for my cousin, I discovered that trying to reach the IRS for clarification was practically impossible. I kept getting disconnected after waiting on hold for hours! Then someone told me about Claimyr (https://claimyr.com) and showed me this video: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but they actually got me connected to a real IRS agent who explained exactly how to handle the inheritance transfer properly. The agent confirmed that having my cousin endorse the check to me could create documentation issues for both of us. Instead, they suggested alternative approaches that were much cleaner from a tax perspective. Saved me hours of frustration and potentially an audit headache. I finally got a definitive answer from the IRS directly instead of trying to piece together information online.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway out of desperation because I needed answers about an inheritance situation similar to yours. The service actually worked exactly as described. I got a call back within about 2 hours (which is miraculous compared to my previous attempts), and the IRS agent I spoke with gave me clear guidance about my specific situation. They confirmed that having someone endorse an inheritance check to me would create unnecessary complications, and suggested better alternatives. Definitely changed my perspective on dealing with the IRS. Having a direct conversation with an agent saved me from making what would have been a pretty big mistake.

Why doesn't your sister just deposit the check herself? There's gotta be a reason she doesn't want to put it in her account. Maybe she owes back taxes and is afraid of the IRS taking it? Or has creditors after her? I'd be careful about getting involved in this situation - could be more complicated than it seems.

The best solution here is for your sister to deposit the check herself, then transfer you money if she needs to (or withdraw cash). Signing over large checks often causes problems with banks these days - many won't even accept third-party checks anymore, especially for large amounts. Also worth noting - she should check whether she needs to file anything with the state. Some states have inheritance taxes even though the federal government doesn't tax inheritances directly.

I'd strongly recommend against doing this. Beyond the tax complications others have mentioned, there are several red flags here that concern me as someone who's dealt with similar situations. First, legitimate inheritance checks can be deposited by the named recipient at any bank, even if they don't have an account there - they can cash it for a fee. The fact that your sister is specifically asking you to deposit it rather than handle it herself suggests there may be issues with her banking situation that she's not being transparent about. Second, many banks will flag or reject third-party endorsed checks over certain amounts (often as low as $1,000-$2,500) due to fraud prevention policies. A $25,000 third-party check is almost guaranteed to trigger additional scrutiny, holds, and potentially a Suspicious Activity Report. From a tax perspective, yes - this could create complications for you. The bank will report the deposit as income to your SSN, and you'd potentially need to file gift tax paperwork when transferring the money back to her. My advice: Tell your sister she needs to handle this through her own banking relationship. If she truly can't access her accounts, she should speak with the bank directly about her options, or consider opening a new account elsewhere. Don't put yourself at risk for someone else's banking problems.

I completely agree with the advice to have your sister handle this herself. As someone who works in banking compliance, I can tell you that third-party endorsed checks for large amounts like $25,000 are almost always going to cause problems. Most banks have strict policies against accepting third-party checks over certain thresholds - usually somewhere between $1,000-$5,000 depending on the institution. Even if your bank accepts it, they'll likely place an extended hold (7-10 business days minimum), require additional documentation, and possibly file a Currency Transaction Report since it's over $10,000. From your perspective, the deposit would show up as income in your account, which could trigger tax reporting requirements. Even though you'd be giving the money back to your sister, the IRS systems don't automatically know that - they just see a large deposit to your account. Your sister's "bank account issues" really need to be clarified. If it's something simple like a closed account, she can open a new one. If it's something more serious like garnishments or liens, then you definitely don't want to get involved as it could make you appear to be helping her hide assets. The safest approach is to tell her she needs to deposit it herself or cash it at the issuing bank. Most banks will cash their own checks even for non-customers, though they'll charge a fee.

You're absolutely making the right decision by not getting involved in this situation. As someone who's seen similar scenarios play out, I can tell you that "bank account issues" is often code for more serious financial problems that you definitely don't want to inherit. Beyond all the excellent points about tax complications and bank policies that others have raised, there's another angle to consider: if your sister's inheritance gets mixed up with your finances in any way, it could potentially complicate things for both of you down the line. Inheritance money sometimes gets scrutinized during divorces, bankruptcy proceedings, or other legal situations. The cleanest approach is always to keep financial transactions separate and transparent. Your sister received the inheritance, so she should be the one to deposit it. If her current bank won't work with her, literally any other bank will open an account for someone with a $25,000 deposit to make. You're being a good sister by wanting to help, but sometimes the best help is steering someone toward handling their financial affairs properly rather than taking shortcuts that could cause bigger problems later.