My DW's Grandmother passed away earlier this year.My condolences.The estate, what little there was was split evenly between the 3 sisters. My dMIL received 1/3 of the total amount and at her discretion, chose to have it split 3 ways so that she kept 1/3, 1/3 came to my wife and 1/3 to my dSIL.Will I be responsible for any taxes on this amount? We're talking less than $10,000 that was given to DW and I.No. Inheritances are not taxable income, so there's no effect on your 1040. (Pub 525)There is no Federal inheritance tax. Federal estate tax is imposed on the estate, but that's not applicable in this case. There may be a state inheritance tax, but if there is it would be imposed on your MIL, not your wife.Your MIL made a gift to your wife, which falls under gift tax rules. Gift tax is imposed on the donor, not the recipient. I believe the limit for tax-free gifts in 2010 is $13,000, so if MIL is planning any more gifts this year she should check that our first. There are easy ways around it.PhilRule Your Retirement Home Fool
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