Tax on untInheritance

Forum|Forum|2 years ago
October 25, 2023
1 reply
17 views

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.

Ask the Experts - Extension - Sept 2023

KarenL4

Level 6

Hi, ThomasNowak22,

First, sorry for your loss. I just recently lost someone and know it's difficult to handle financial questions while dealing with loss.

Also, great question! You will not have any federal inheritance tax on your inheritance. The federal government doesn't have an inheritance tax. As of 2023, six states impose an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania, so if you are a resident of Michigan, you won't have an inheritance tax UNLESS your Aunt died before September 30, 1993. I think that's unlikely, based upon your message, but am including this information just in case. It's also possible, but unlikely, that the life insurance can be subject to estate taxes. This article explains more about those unlikely incidences.

It sounds like your inheritance was cash only. If you did inherit property in addition to cash, it will be important to capture the basis of inherited property. Here's an article about that topic.

Thanks for reaching out. Please use the "thumbs up" to cheer this response if it helped.

Regards,

Karen

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