Inheritance question

[Lilboog82]

So my grandmother passed a month ago and apparently she left me a little bit of money, talking about less than 50k. My question is do I have to pay federal and state taxes on that money. From what I gathered on the ol’ Inter web is that IN doesn’t have an inheritance tax and the federal govt doesn’t start taxing on inheritance until millions are given away. But, when dealing with the banks an paper work, they ask how much taxes I want taken out. I have even talked with a person a one of the financial institutions in our state and knows the amount to be going to me but still asks how much I want taken out for taxes. So for any of you fellow ingoers who have received some inheritance or anybody that has any knowledge about this I would greatly appreciate your input. Thanks

 

[churchmouse]

Yes. We had to pay when the spouses Mother passed.

Best thing here is to ask a professional. Do you have a good tax guy/gal.....if so make the call.

 

[Dirtebiker]

Yep, trust a CPA with this question. Not a bunch of yahoos on the internet.

 

[Lilboog82]

Kinda figured Uncle Sam would want their cut of the pie. Wouldn’t want to steal from his pockets now!

 

[d.kaufman]

I know when my parents died big brother took a huge cut. I want to say roughly 25%. This was 23 years ago, so not sure Whats changed. Im sure if you google inheritance tax you could at least get an idea of what to expect.

My condolences on your loss

 

[AtTheMurph]

Uncle Sam is not taking any of that money from you. It is possible the estate may owe taxes but you will not, unless the money is an inherited IRA or deferred annuity. In that case the money taken from the inherited IRA would be income taxable to you or the gains in the deferred annuity would be income as well.

 

[woowoo2]

It depends on the source.
Life insurance?
Cash from bank accounts?
IRA?

All are treated differently.

 

[Lilboog82]

Sounds like I should just go to an licensed professional, lol. Got to love all the red tape and hoops to jump thru.

 

[d.kaufman]

I googled on the inheritance tax. It looks like that was repealed in 2012, so that's a good thing

 

[citizenkane]

It depends on the source of the money. If she made you beneficiary of an account funded with pre tax dollars you will have to pay the tax. When my mother passed I was listed as beneficiary of a 401K she had some money in. I had to fill out some paperwork to claim the money and they had me select how much tax I wanted withheld.
If the account was funded with post tax dollars it shouldn’t be an issue.
I’d say not enough info has been provided to answer your guestion. My best guess is from the sound of it it’s from an IRA or 401K.

 

[bacon#1]

It depends on the source.
Life insurance?
Cash from bank accounts?
IRA?

All are treated differently.

Life Insurance-No
Bank Accounts-No, and make sure you have a beneficiary on your own account.
IRA-yes

All things I learned this year in my experience. But as always, contact a professional.

 

[Lilboog82]

Ok thanks all for the input

 

[doddg]

With friend of mine, his Dad would give each of the grown kids $13,000 every Xmas b/c that was under the "gift" tax threshold at that time (probably a little more now): if more = pay taxes on it.

 

[indyjs]

If a 401k, you may be able to leave it as a 401k and pay the Required Minimum Withdrawal on it every year.(Direct rollover into an IRA)
You also get to declare if (401k) was financed pre or post taxes and what the cost basis was (price when purchased vs when sold).
I'm not up to date. Probably should see a pro

 

[AtTheMurph]

With friend of mine, his Dad would give each of the grown kids $13,000 every Xmas b/c that was under the "gift" tax threshold at that time (probably a little more now): if more = pay taxes on it.

The recipient never pays gift tax or the estate tax. The donor or estate pays.

 

[AtTheMurph]

It depends on the source.
Life insurance?
Cash from bank accounts?
IRA?

All are treated differently.

All are not treated differently. It would be more accurate to state that everything is treated the same except for qualified plan money and deferred annuities.

Everything else is just your money once inherited (assuming Indiana resident and we continue to have no state inheritance or estate tax.)

 

[bgcatty]

Seriously? Hire an attorney who does estate work and stop trying to do administration of the estate by yourself with “advice” from the internet. To do otherwise would be silly!

 

[JettaKnight]

As you may gather, the answer is, "It depends."

You'll want to contact a professional to assess it and possibly come up with a plan to deal with the tax ramifications.

 

[Sigblitz]

Life Insurance-No
Bank Accounts-No, and make sure you have a beneficiary on your own account.
IRA-yes

All things I learned this year in my experience. But as always, contact a professional.

Yes, separate form at the bank for naming one beneficiary.