Q: My sister passed away recently and I am the sole survivor and beneficiary to financial and real estate assets. Do you have any information on inheritance and beneficiaries and are they the same or different when it comes to taxes? Thanks.
A: My condolences on the loss of your sister.
In general, anyone who dies in 2009 is able this year to pass down $3.5 million in assets to you federal estate tax free. If your sister’s estate is smaller than this, you likely won’t have to pay any federal estate taxes. Depending on where you live, and how much the estate is worth, you may have to pay some state estate taxes. Your state’s department of revenue can assist you in figuring out what your tax bill might be, and even if you are required to file an estate income tax form for your sister’s estate (it is not required for estates with little or no assets).
In addition to owning some or no federal or state estate taxes, you may owe other sorts of taxes depending on the types of assets your sister held before her death. For example, if you inherit her 401(k) or other tax-deferred accounts, you may have to pay income tax on those assets, even if they do not exceed the $3.5 million threshold.
What you really need is an estate attorney who can help you sort through everything, file any necessary paperwork, transfer title to the real estate and financial assets, and get the estate closed.
It’s hard to do all of that when you’re mourning the loss of your beloved sister. But working through the paperwork will, in its own way, help the healing process.
If you go to my website and type “inheritance” into the search engine, you’ll get to the topic page. From there, you’ll find all kinds of articles relating to inheritances and estate taxes. I hope this helps.
April 30, 2009