Finding out you just inherited your great-grandmother’s lake house on Mackinac Island is great news until your brother tells you to brace yourself for the IRS to take its cut. Will you have to pay extra taxes as the new owner? What if you sell it? Is the money you get from the sale considered taxable income? We asked tax gurus about what kind of tax burdens you might come up against when you inherit an asset like a car or a home. Here’s what they had to say:
Imani Francies is a finance expert with the life insurance comparison site, EffortlessInsurance.com.
The Tax can Decrease Their Inheritance.
Those who are receiving an inheritance from the estate are not responsible for paying estate taxes. However, an inheritance that is passed on may be affected in size because of taxes.
The amount of tax that is implemented on an estate is dependent on both the size of the estate and the state where the deceased lived before passing away.
This impact of taxes on your estate is why a survivorship life insurance policy can be useful. If the policy is set up correctly, it can be excluded from the taxable estate which makes up for the loss in size of the estate because of taxes.
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