Inheritance tax

ThomasNowak22 · ‎October 25, 2023

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 · ‎October 25, 2023

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

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