Will I owe tax on my inheritance?
Q: My uncle died earlier this year. I was recently contacted by a lawyer who told me I will be inheriting my uncle’s classic car. The car is a 1957 Chevy and is in very good condition. How much will I have to pay the I.R.S. in inheritance tax? I don’t really know how much the car is worth.
A: Before I answer your question, let me clarify exactly what we’re talking about. When people refer to an inheritance tax, or a death tax, what they’re talking about is the federal gift and estate tax.
The short answer to your question is this: you don’t have to pay any estate tax to the I.R.S. regardless of what the car is worth. If you inherit property you do not pay the tax.
If any tax is owed it will be charged as an expense to your uncle’s estate. The executor of his estate will have the responsibility of paying the tax. The executor will use funds from the estate to pay the tax.
If you are only inheriting the car, you shouldn’t be affected by the estate tax.
But what if you inherited all of your
In that case you might be affected by the estate tax. Remember that if any tax is due it will be paid with funds from your uncle’s estate. So even if you don’t have to pay the tax out of your own pocket, it would shrink the total amount of your inheritance.
How do you know if your uncle’s estate will owe the tax?
There are several factors that you need to consider when making this determination and you may need the help of a good accountant to figure it out. But I’m going to keep things simple for the sake of this column.
Estate tax will be owed by your uncle’s estate if he gave away a large amount of his property while he was alive or after his death (under the terms of his will). Since he died in 2013, the maximum amount of property he could give away — without owing any estate tax — is over five million dollars.
If your uncle had a large estate that was worth more than five million dollars, the executor of his estate may have to pay some tax to the I.R.S.Source: texas-planning.com