Taxes on an escheated savings account

Hello,

A savings account of my spouse was escheated to Michigan because the beneficiary (not me) could not be found. I can now claim the money (large amount) for the estate. Is this money taxable?

posted

sorry for your loss. Interest earned prior to death would be reported on their final 1040 return. interest earned afterwards would be taxable to either the estate or heir. Principal which included any interest earned up to the date of death is not income.

If there is interest, that is taxable to you. The principal balance is not taxable. You will likely not get any tax paperwork from the state, so reporting the interest would be on the honor system.