Inheritance tax

[ThomasNowak22]

When my aunt died she named me as a beneficiary of a $20,000 life insurance policy and also left me $60,000 from her trust.  Do I have to pay federal tax on the life insurance or on the inheritance from the trust. Will I have to pay a Michigan tax?

I am 75 years old and a resident of Michigan.

[EleanoreS]

Good day Thomas,

I am sorry for the loss of your Aunt.  

The principal of the life insurance policy and the trust are not subject to income tax.  If the taxable Estate (all assets) exceeds $12,920,000 an Estate tax return, Form 706 would have to be filed. That would not be your responsibility as a beneficiary.

You would be responsible to pay tax on any earnings received on the $80,000 after the date of death of your aunt.

The information provided regarding your personal income tax pertains to both the IRS and state of Michigan.

Here is a great article on protecting your inheritance from taxes 

Thank you for reaching out to the TurboTax Community.