do i pay taxes when someone leaves me money
TRANSCRIPT
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ANNAPOLIS • MILLERSVILLE • BOWIE • WALDORF
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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ANNAPOLIS • MILLERSVILLE • BOWIE • WALDORF However, close relatives are exempt.
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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