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Hi all,
I'll probalby cross post this in Inheritance Strategies as well, but here goes.

What is the maximum amount a person can inherit from a relative before they owe taxes on the money?
I just inherited a pretty hefty chunk and am trying to figure out before I invest how much I'll owe Uncle Sam.

Thanks in Advance,
Malachite
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Malachite asks:

>> What is the maximum amount a person can inherit from a relative before they owe taxes on the
money? I just inherited a pretty hefty chunk and am trying to figure out before I invest how much I'll owe
Uncle Sam. <<


If this is a true "inheritance", meaning given on the decedent's death, then you (the inheritor) owe nothing, no matter how much was given to you.

The confiscatory estate taxes are just that... paid by the estate. The estate can distribute $625000 before incurring estate taxes.

Oh (owe ?), of course, that's just for Federal Income taxes. Your state may have it's own specific methods for getting its hands on your money.

Um- just so you know - I might be all wrong, but that's the way I remember it.
My advice worth every penny you paid for it:

- DD
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All funds received as part of an inheretance are federal and state tax free to you. Estate taxes are paid by the ESTATE prior to distribution.

If the gross estate itself is less than $625,000 there is no estate taxes (federal or state)imposed on it.

Ahmed
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All funds received as part of an inheretance are federal and state tax free to you. Estate taxes are
paid by the ESTATE prior to distribution.


In Pennsylvania if the estate does not pay the tax the person who gets the money will be liable. I would assume this would be a common pratice.

Lets assume the estate has 1,000,000 in joint name with right of survivorship and no other assets. The estate can not pay the tax because it has no money. I think most states and the IRS would come after the joint tenant.
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[[What is the maximum amount a person can inherit from a relative before they owe taxes on the
money?
I just inherited a pretty hefty chunk and am trying to figure out before I invest how much I'll owe
Uncle Sam.]]

As pointed out in previous posts, any estate tax due on these funds are paid at the estate level...before you ever receive the funds. So the answer is really "unlimited" in your situation.

But as also pointed out, there are limits that the decedent can pass through to beneficiaries before the estate tax kicks in. So the need for estate tax planning is at the decedent level.

Contact the executor or administrator of the estate in order to find out about the entire picture. You'll need to talk with the executor anyway...especially if "property" (i.e., anything other than cash) was passed to you. You'll need to know the "basis" of that property in your hands in order to compute your gain or loss on the sale of that property if (when?) you finally sell the property.

TMF Taxes
Roy

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[[What is the maximum amount a person can inherit from a relative before they owe taxes on the
money?
I just inherited a pretty hefty chunk and am trying to figure out before I invest how much I'll owe
Uncle Sam.]]

As pointed out in previous posts, any estate tax due on these funds are paid at the estate level...before you ever receive the funds. So the answer is really "unlimited" in your situation.

But as also pointed out, there are limits that the decedent can pass through to beneficiaries before the estate tax kicks in. So the need for estate tax planning is at the decedent level.

Contact the executor or administrator of the estate in order to find out about the entire picture. You'll need to talk with the executor anyway...especially if "property" (i.e., anything other than cash) was passed to you. You'll need to know the "basis" of that property in your hands in order to compute your gain or loss on the sale of that property if (when?) you finally sell the property.

TMF Taxes
Roy

Want to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. There is still time available to do that tax planning (and tax saving) before the end of the year. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Pay special attention to the "archives" section. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
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[[In Pennsylvania if the estate does not pay the tax the person who gets the money will be liable. I
would assume this would be a common pratice.]]

Sure...but then you also sue the pants off of the executor of the estate for not paying the taxes properly to begin with.

I can only assume, when these questions are asked, that the appropriate measures have been taken. If I can't make that minimal assumption, there's not a question in the folder that I could answer.

[[ Lets assume the estate has 1,000,000 in joint name with right of survivorship and no other assets.
The estate can not pay the tax because it has no money. I think most states and the IRS would
come after the joint tenant.]]

If the JT was not the spouse, then the executor has the right (and obligation) to move in and liquidate some of those funds...at least half of them. But, receiving funds via JT is not the same as receiving an inheritance by definition.

Sorry, but I just don't have time to split hairs.

TMF Taxes
Roy
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