taxes and inheritance?

Question

recieved large sum cash from deceased mother. 200K. do I have to claim, I know I dont have to pay taxes on it. what do I do at tax time?? no real estate, just cash

Answer 1

I don't know why Bostonian got all those negatives. The person before him should make sure he gets his terminology right. An estate tax is a tax on the estate, the total value of what the deceased owned at time of death, minus certain deductions. It is paid by the executor on behalf of the estate, from the funds of the estate.

An inheritance tax is a tax on the amount left to a particular person. In principle, it is a tax paid by the heir. As Bostonian said, there is no federal inheritance tax.

The discussion of retirement accounts was correct, although if you received a $200,000 cash sum, it doesn't sound like that.

And no, it is not income, there is no place to record it on the 1040, therefore you don't have to report it. I have been an executor (and heir) twice, working with an attorney, and never reported it (not that much, but the principle is the same.)

Answer 2

Depends on if it was life insurance or retirement accounts. Where the cash comes from makes the difference. Life insurance bypasses probate (if beneficiary is named) but since the deceased doesn't benefit then no taxes on that sum are due. Retirement accounts are different though. They bypass probate if beneficiary is named, however the deceased would have benefitted from it in life. If it's a Roth IRA no taxes are due, however if it's a Traditional, 403B, 401K, whatever, the person who receives it pays the tax on it if you opt to take a lump sum or payments over time.

I am going through the same thing and have received both. I have not withdrawn from the retirement account and will not do so until I have talked to a tax specialist. I would recommend you talk to someone too! It will be worth your while.

Death tax on the federal level only applies to sums over $2M I believe, otherwise it's exempt from death tax (this applies to the estate only). Check your state as far as their inheritance taxes. Mine doesn't have inheritance tax.

Don't let bostonianinmo steer you in the wrong direction either. You do have to report (make sure executor has done his/her job) the money which won't be income but any interest you have earned on the money since you received it will be considered "income". Like I said talk to a professional. Your AGI or Adjusted Gross Income can be affected by the interest you have earned on that sum.

Answer 3

The financial institutions that held the money that you inherited will be sending you tax documents. You didn't say if the cash was from liquidating other assets, like stocks, bonds, IRAs, 401ks or what. Depending on the source of the cash, you may receive 1099INT, 1099DIV, 1099R, 1099B, or perhaps other documents. Any such documents will require an entry on your tax return.

You know that the sum you inherited is not subject to income taxes, so I assume you did not inherit an IRA or 401k. If you inherited an account that was earning interest or dividends, you will report those earnings on your tax return.

There is no federal income tax reporting requirement for the inherited money itself.

Answer 4

There is no Federal inheritance tax in the US. No reporting is required. (If any estate taxes were due, they were paid by the estate already.)

Some states still have state inheritance taxes -- NJ and PA come to mind -- so you'll have to check with your state's tax authorities on that. Even if there is a state inheritance tax, many times it will be paid for you by the estate. The executor of the estate can answer that question.

Answer 5

When my father passed away,in 1999, you had to pay taxes on anything over 100 thousand. You might check, but there is an inheritance tax. You may be able to get around it by claiming half as a gift. Get a consultation with an tax expert, most times you can ask questions for free on their websites.

Answer 6

Assuming that your Mother has already paid taxes on the full 200k, No. If she did not taxes will be due. Otherwise, taxes are due on any gains the money has accrued. Example, the money has been accruing 5% interest.