Do I Pay Taxes When Someone Leaves Me Money

ANNAPOLIS • MILLERSVILLE • BOWIE • WALDORF

DO I PAY TAXES WHEN

SOMEONE LEAVES ME MONEY?


TAXES ON INHERITANCES

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


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


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.


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


CAPITAL GAINS TAX


The capital gains tax is applicable when a gain is realized


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

it was in your possession.


STEP-UP IN BASIS


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


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

that took place during the life of the decedent.


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.


FEDERAL ESTATE TAX


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


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

a 40 percent maximum rate.


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

applicable on transfers that exceed $5.45 million.


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.


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

level.


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

$2 million in 2016.


STATE LEVEL INHERITANCE TAX

Maryland also has a state level inheritance tax.


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

ANNAPOLIS • MILLERSVILLE • BOWIE • WALDORF However, close relatives are exempt.


TAX EFFICIENCY STRATEGIES

Maryland also has a state level inheritance tax.


There are tax efficiency strategies that can be implemented when an

estate is subject to taxation.


The ideal course of action will depend upon the circumstances.


OUR FIRM CAN HELP


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

qualified estate planning attorney.


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

consultation.


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


Or visit our website www.sinclairprosserlaw.com

Nicole Livingston

Jon J. Gasior

Colleen SinclairProsser

Victor A. Lembo

Do I Pay Taxes When Someone Leaves Me Money

Law

Transcript of Do I Pay Taxes When Someone Leaves Me Money