4 years after friends death stock was found of 55,000. It's now in estate account & has a tax id. Do I claim this on my taxes as inheritance & do Estate Tax on this?

[krystlerose]

I live in NJ as did my friend. She died August 2012. No taxes were done then as she was in nursing home. I am executrix of estate. 

[fanfare · Accepted solution]

There is no federal tax on an inheritance.

NJ does have an inheritance tax. As an heir who is not a relative, there is no exclusion. The inheritance tax is 15%.

Filling out the NJ Inheritance tax form is a manual, tedious process, and then takes months to wind its way through the NJ Division of Taxation.

Interest 
"Interest is calculated at the annual rate of 10% on any direct tax or portion not paid within 8 months of the date of the decedent’s death."

You may wish to contact the Inheritance tax department to see if this penalty can be waived in your situation.

Go here for the forms:

http://www.state.nj.us/treasury/taxation/prntinh.shtml

The phone number is on the form.

[ScruffyCurmudgeon]

Considering the amount of the asset, and also given the fact that no doubt dividends have been either paid or have been accruing these past four years, and that income is to be reported in the name of the Decedent, and therefore the Estate, I would strongly recommend filing a simple Form 1041 once you are sure that all income generated over the four years is in fact received.

Steps to take:

1. Contact the Registrar of the stock - typically a bank, and ensure that the stock is registered first in the name of the Estate or Decedent.  Then request that all accrued dividends be paid to the Estate.  This of course assumes that the dividends did not strangely go off somewhere!
   
   
2. File a Form 1041 for the Estate.  A $600 Exemption exists so it is possible that the total income due and received or accrued is less than that.  However, if the dividends do exceed the total of $600 plus the top limit for 15% tax @ $2,500, a total of $3,100, then the dividends with be taxable and may reach a tax rate of 20% to be paid out of the assets of the Estate.  There is an alternative which is somewhat more complex.
   
   Alternatively, if the income was accrued but never received until now, you may treat the dividend income as Income With Respect to a Decedent and allow the Estate to pass not only the income but also the income tax liability to you.  You may have a lower tax rate.
   See  here:   https://www.irs.gov/publications/p559/ar02.html#en_US_2015_publink100099580
   
   
3. Assuming that the Estate has assets under $5.45 million, there is no Estate Tax or obligation to file Form  706 Estate Tax.  You did not mention in which state the decedent resided.  Of those states that have an Estate Tax, the lowest exempted amount is $635,000 so that too may be irrelevant.  As to your residence, New Jersey does have an Inheritance Tax  so read here: https://www.legalconsumer.com/inheritancelaw/topic.php?TopicID=4&ST=NJ

[fanfare]

As to your residence, this is irrelevant. What matters is the decedent was a resident of NJ. The estate owes the tax.
Money you receive from the estate is usually not taxable income.