Do I have to pay taxes on an inheritance?
April 12, 2006
Date: Thu, 23 Mar 2006
I am the beneficiary to an escrow account of over $2 million. Do I have to pay taxes for it? Will the IRS ask where the money came from? What rules and laws apply?
Date: Mon, 03 Apr 2006
I am assuming this a trust account that you will be inheriting. The trustee or creator of the account may be responsible for paying estate, gift or generation-skipping taxes for these funds. They should be working with a tax advisor about this. You may be responsible for paying income taxes on income earned in the account. The estate or trust would issue a Schedule K-1 for items you are required to report. I suggest that you discuss these matters with the executor or trustee.
The IRS won't automatically ask where you got these funds, but you will want to keep documentation about how you received them.
For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links