Inheritance & Estate Tax | Southern Minnesota

Q:  My mom passed away, and we inherited her stuff.  We were told by our neighbor that we don’t have to pay taxes on any of it because it was less than $1.6 million for Estate Tax.  Is that correct?

A:  Well, no, that is the limit for the Estate Tax but it depends on what you inherit.  If you inherit her IRA or retirement plan at work those accounts were tax deferred so all of that money will be taxable when you take it out, and you will be required to take it all out within five years.

If you inherit a non-qualified account, the money will get a step up in basis to the Fair Market Value on her date of death so if it’s sold within six months for her date of death, there will be no gain.

But if your mother had any non-qualified annuities, then it’s a whole different story.

Do yourself a favor and before you do anything, bring your information into your accountant or financial planner…or, better yet, come see me as I’m both!