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New Member
posted May 31, 2019 6:07:15 PM

Inheritance money was deposited in the executors bank account. Can she just write a check? Will I get taxed?

Can the executor write a check for full amount of inheritance without me getting taxed?

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2 Replies
Level 15
May 31, 2019 6:07:17 PM

In inheritance received by the designated legal beneficiary recipient from the deceased, is not taxable or reportable on any tax return.
However, any earnings that may have accumulated on that inheritance since the day the deceased passed, are taxable income to the beneficiary recipient. Note that this is NOT TRUE for monies inherited from tax deferred things such as an IRA, 401(k) or other things of that nature.

Level 15
May 31, 2019 6:07:18 PM

It's really hard to answer that question.  "Money" could be almost anything. 

Generally, you don't pay tax when you inherit.

If the deceased had income after their death, the tax on that would be paid by the estate.  Such as, an estate sale for their property, if it sold for more than they paid.  Or if the estate sold a house.  Or stocks and bonds, or a legal settlement for injury or illness.  Or the estate tax for very large estates.  After the estate pays the tax, the rest can be distributed to the heirs.  The money can be distributed early if the executor holds onto enough to pay the tax.  If the estate owes tax and the executor did not set aside enough to pay the bill, it can be "clawed back" from the heirs -- its not a tax on you, but caused by the estate paying out too much.

Now, if the estate included something like a 401K or IRA where the deceased never paid tax when the money was contributed, then you do owe income tax when the money is withdrawn, like any other IRA or 401K.  Or the estate might have owed stocks, that were sold to pay money out to the heirs.  You may owe gains tax if the stocks added value after the date of death.  Let's say the deceased had 100 shares of Apple that they bought for $50 a share, and when they died they were worth $500 a share.  That gain is not taxable to you.  But if, on the day they were sold, they were worth $510, then that $10/share is gains income taxable to whoever inherited the stock and sold it.  Or if the estate sold the stock so that all the heirs could have a share, then all the heirs owe part of the tax on the gain.

Assuming the executor knows what they are doing, they can tell you where the money came from and whether any part of it represents income or a gain to you.