I Inherited Money, Do I Need to Pay Taxes?

As a probate attorney, this is the most common question I get asked by clients, family, friends and acquaintances. Generally, the answer is no.  However, it really depends on the type of tax referred to and the asset inherited.

An estate may be required to pay federal estate tax, but that would only apply to estates over $11.2 million for the year 2018. Some states also have estate and/or inheritance tax, but Arizona is not one of them.

Remember, estate tax is a tax paid by the estate of the deceased person and inheritance tax is paid the person or persons who inherited the assets of the deceased person. If tax is owed by the person who inherited, it is most likely income tax.

A beneficiary may have to claim and pay income tax on the income they received from the estate. For example, if a person received $500,000.00 from an estate, of which $499,000.00 is principal and $1,000.00 is income, then the beneficiary would have to claim and pay income tax on $1,000.00 of income.

Laura M. Trujillo

Disclaimer: This blog is for information purposes only. Legal advice is provided only through a formal, written attorney/client agreement.