do i pay taxes when someone leaves me money

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DO I PAY TAXES WHEN

SOMEONE LEAVES ME MONEY?

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TAXES ON INHERITANCES

You may wonder about the taxes that you may face if you receive an inheritance.

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In this presentation, we will look at a number of different taxes.

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INCOME TAXES

Since the IRS wants you to report all sources of income, you may assume that you have to

include an inheritance when you file your returns.

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In fact, an inheritance is not considered to be taxable income.

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CAPITAL GAINS TAX

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The capital gains tax is applicable when a gain is realized

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You realize a capital gain when you sell an asset that appreciated while

it was in your possession.

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STEP-UP IN BASIS

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Inherited assets get a step-up in basis for capital gains purposes.

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This means that the inheritor would not be responsible for the gains

that took place during the life of the decedent.

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The capital gains tax could be applicable in the future if the assets continue to appreciate while they

are in the possession of the inheritor.

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FEDERAL ESTATE TAX

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So far, the news has been good, but now we have to look at the other side of the coin.

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There is a federal estate tax that can enter the picture, and it carries

a 40 percent maximum rate.

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Fortunately, most people do not pay the tax, because it is only

applicable on transfers that exceed $5.45 million.

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MARYLAND STATE ESTATE TAX

There is another advance directive for health care that should be executed called a durable power

of attorney or health care proxy.

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We practice in Maryland, and our state has an estate tax on the state

level.

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This tax can be applied on the portion of an estate that exceeds

$2 million in 2016.

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STATE LEVEL INHERITANCE TAX

Maryland also has a state level inheritance tax.

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This tax can be applied on transfers to each nonexempt inheritor.

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TAX EFFICIENCY STRATEGIES

Maryland also has a state level inheritance tax.

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There are tax efficiency strategies that can be implemented when an

estate is subject to taxation.

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The ideal course of action will depend upon the circumstances.

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OUR FIRM CAN HELP

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We can help if you would like to discuss your objectives with a

qualified estate planning attorney.

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Feel free to send us a message if you would like to set up a

consultation.

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If you are ready to get started, contact us to set up a consultation.

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Or visit our website www.sinclairprosserlaw.com

Nicole Livingston

Jon J. Gasior

Colleen SinclairProsser

Victor A. Lembo