My father passed away recently, and my mother is very ill. I am the executor of their estate. They have a revocable living trust, and I am trying to predict the tax consequences for myself and other heirs. They have about one million dollars in CDs and savings bonds that have earned interest for which no taxes have yet been paid. Are my following assumptions correct?
- Because their estate is less than $13,610,000, there will be no federal estate tax and I won't need to file federal Form 706.
- Because I live in Colorado, no state estate tax or state inheritance tax will be imposed.
- Because the heirs live in Pennsylvanian, they might owe state inheritance taxes.
- When inheritors redeem their inherited bonds, they will owe taxes on all the interest that has accumulated, and that interest will be taxed at ordinary income tax rates not as capital gains.
- Likewise, when the CDs that inheritors receive mature, the inheritors will owe taxes on all the interest that has accumulated, and that interest will be taxed at ordinary income tax rates not as capital gains.
