Financial question

[lickerish]

If someone gives you several thousand dollars in an inheritance.. do you have to claim it in taxes?

 

[lobito]

Inheritance is supposed to be tax free, last I heard anyway.

Some states MAY not go that way though.

 

[Lasz]

last I heard you DID have to claim them on your taxes, but I am not sure about that one.

 

[lickerish]

Ok, here's another thing.. if an inheritance is left to a child.. and it is in the form of a time certificate.. and it was put in the childs name upon the (grandparents) time of death .. and the childs parent (ok me) is like the co-signer(??) on it.. but it's not in my name, it's in the childs.. do I still file taxes on it?

confused yet?

 

[perks]

anything less than 10,000 per annum is considered a gift and doesn't have to be claimed.

 

[TWB]

No. Inheritances are not taxable as income. If there is estate/inheritance tax, you may not see all of the inheritance because of that tax. Usually inheritances are paid out after the estate or trustee has paid the tax. THis is not always the case. How much did the decedent have when s/he died?

There is a 1 million dollar estate tax credit this year, as well as a 1 million dollar gift tax credit, so if it was not near that amount you have nothing to worry about federally.

If not, there may be state taxes. Check with the administrator of the estate or his/her lawyer and you will get some direction.

 

[TWB]

reerky's comment:

The per year exemption is 11,000 per year this year, up from $10,000, but that is gift tax not inheritance tax. Any excess would serve to reduce the 1 millon dollar lifetime gift tax credit for the person giving the gift, not the recipient.

Happy taxes!

 

[heterotic]

I found the bracket for my $200,000 from running numbers, but what percentage do I pay on my $50,000 from robbing banks? I'm still confused about that, and the IRS isn't beign helpful at all.

 

[perks]

reerky's comment:

The per year exemption is 11,000 per year this year, up from $10,000, but that is gift tax not inheritance tax. Any excess would serve to reduce the 1 millon dollar lifetime gift tax credit for the person giving the gift, not the recipient.

Happy taxes!

ahhhhh... cool...

what if you are gifted with more than 1million dollars in your lifetime? what then?

 

[lickerish]

OK.

My mom ended up leaving like $25,000+ for both me and my sister.. each. It is in her savings account, and my dad wants to give it to us now. But if I make $20,000 year in income from employment.. and add on the $25,000 this year from my inheritance.. What is my tax situation next year gonna look like.

And do I have to claim it for income? Cuz if so I'm gonna kiss my housing and daycare assistance goodbye. God, finally.. 5 years of the state bullshit over and done with.

Now, my mom had started a time certificate for my kids.. which is up to like $4500 each right now and is earning 8% interest. She didn't get a chance to start one for my baby niece. So, in December when the certificates expire.. i'm going to combine the total of the two, and split into three so my niece can get some.. then re-invest.

I am so clueless when it comes to taxes.

 

[Cheyenne]

OK.

My mom ended up leaving like $25,000+ for both me and my sister.. each. It is in her savings account, and my dad wants to give it to us now. But if I make $20,000 year in income from employment.. and add on the $25,000 this year from my inheritance.. What is my tax situation next year gonna look like.

I am so clueless when it comes to taxes.

Did your mom leave it to you or to your dad, and your dad wants to give it to you? From your mom it is an inheritance and from your dad it is a gift. But it isn't taxable to you either way.

 

[Samuari]

OK.

My mom ended up leaving like $25,000+ for both me and my sister.. each. It is in her savings account, and my dad wants to give it to us now. But if I make $20,000 year in income from employment.. and add on the $25,000 this year from my inheritance.. What is my tax situation next year gonna look like.

And do I have to claim it for income? Cuz if so I'm gonna kiss my housing and daycare assistance goodbye. God, finally.. 5 years of the state bullshit over and done with.

Now, my mom had started a time certificate for my kids.. which is up to like $4500 each right now and is earning 8% interest. She didn't get a chance to start one for my baby niece. So, in December when the certificates expire.. i'm going to combine the total of the two, and split into three so my niece can get some.. then re-invest.

I am so clueless when it comes to taxes.

Hun, I don't think that I would look for help on this here. Lit is a great place and Its got some of the smartest folks anywhere, but for real help you should talk to a professional that can look at your personal situation, and give you advice taylored to you.. To find a professional, ask your banker for recomendations.

 

[lickerish]

I know Samuari.. I will eventually, but we've got some smarties here in the meantime.

Cheyenne.. it was for me and my sis.. payable to my dad upon her death, to give to us. My dad is giving it to us now because he doesn't want to pay tax on it. But do I?

 

[koalabear]

I know Samuari.. I will eventually, but we've got some smarties here in the meantime.

Cheyenne.. it was for me and my sis.. payable to my dad upon her death, to give to us. My dad is giving it to us now because he doesn't want to pay tax on it. But do I?

Best to just ask a Tax Accountant in your state. Most states have toll free numbers for such questions. Check for a number on your State Tax Form.

 

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[lickerish]

This random Quote or Scripture is provided in the hopes that koalabear will begin to think about the harm he is causing, and will work on making his own life better rather than criticizing and manipulating others.

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oh get the hell out ya big fat dork.

 

[Laurel]

I found the bracket for my $200,000 from running numbers, but what percentage do I pay on my $50,000 from robbing banks? I'm still confused about that, and the IRS isn't beign helpful at all.

I know! What snobs...

 

[Bob Peale]

I know Samuari.. I will eventually, but we've got some smarties here in the meantime.

Cheyenne.. it was for me and my sis.. payable to my dad upon her death, to give to us. My dad is giving it to us now because he doesn't want to pay tax on it. But do I?

Whoa!

If your parents were married at the time of death (I'm not assuming), then all marital assets pass to the surviving spouse tax free in an unlimited amount.

So as long as they were married, your dad owes no taxes. Additionally, if the money was in a joint account, the IRS treats it as if it was jountly owned the whole time anyway.

Going back to what TWB said, your father can pass $10,000 a year to you and your sister each ($20,000 total) up to $1,000,000 lifetime (and that amount will gradually edge closer to $2,000,000 by 2009) tax free, thereby transferring the $25,000 to you over time.

On a different note, if your parents were not married, the first $1,000,000 of your mother's estate is not subject to the inheritance tax (including her home, cars and other assets), and any moneys that she gifted to her grandchildren would also be added in to get to that limit.

 

[Fly_On_Wall]

lickerish I'm trying to find out this exact thing

all my life i've heard of an inharitance tax anything that's left to you is taxed by the government my pepe just died and he left his house and all he owned (except money) to my mom. but we were told the house is a gift so no longer taxable. but the money her sisters and brother get from him is.

so i'm just as confused as you and tring to help my mom.

 

[Cheyenne]

lickerish I'm trying to find out this exact thing

all my life i've heard of an inharitance tax anything that's left to you is taxed by the government my pepe just died and he left his house and all he owned (except money) to my mom. but we were told the house is a gift so no longer taxable. but the money her sisters and brother get from him is.

so i'm just as confused as you and tring to help my mom.

Bob beat me to the answer for Lickerish. But your question made me think of something else. It depends what KIND of account the cash is in. Is it really a regular bank account? Or is it a regular IRA in a money market fund, or something along that line? The same answer applies to you, Fly. That's why the suggestion to go to an expert in your state is a good one. It really does get complicated.

In GENERAL though, the money you inherit isn't taxable unless it comes from a certain kind of retirement account, etc.

 

[Svedish_Chef]

You'll be ok.

 

[TWB]

Perky Wrote:

ahhhhh... cool...

what if you are gifted with more than 1million dollars in your lifetime? what then?

First you should definitely call me. I have an affinity for millionaires.

Second, if you are gifted over 1 million, you are not subject to any taxes (except on all of the income which will be generated by that gift). However, the person gifting the money will be taxed at an ungodly rate (40-55%) for the amount over the million dollar gift.

There may be state to state differences to this for state taxes.

Practically, you may be paying the tax, however, because if you are gifted 2 million dollars, the taxes owed by the taxed person or estate have to be paid from somewhere. . .

 

[TWB]

There is an unlimited exemption for spouses, which is why there is no tax to a wife.

 

[TWB]

Lickerish, you have no problem. It is a gift from your dad and it is not enough to incur any federal tax issue, unless your dad is a millionaire.

If you don't believe me:


From the IRS:
No tax on the person receiving your gift or estate. The person who receives your gift or your estate will not have to pay any gift tax or estate tax because of it. Also, that person will not have to pay income tax on the value of the gift or inheritance received.

http://www.irs.gov/formspubs/display/0,,i1=50&genericId=12908,00.html

If you all don't believe me, then Nyah Nyah Nyah.

 

[Bob Peale]

Now, my mom had started a time certificate for my kids.. which is up to like $4500 each right now and is earning 8% interest. She didn't get a chance to start one for my baby niece. So, in December when the certificates expire.. i'm going to combine the total of the two, and split into three so my niece can get some.. then re-invest.

Lickerish, technically, if the CDs are in your children's name, that money is theirs, not yours. As their guardian, you have the fiduciary responsibility to direct investments, but you do not have the authority to make distributions to third parties (even on their behalf).

That said, if you want to provide for your neice, take a look at your state's Section 529 plans and make a small contribution out of your (or your sister's) inheritance.

If she is still a baby, a relatively small amount will grow to a somewhat more significant amount through th epower of compounding.