The following information applies to federal law
in the US. If you are from another country, or any of the beneficiaries live in another country, please send a follow-up with specifics.
Inherited income is not generally not considered taxable income
, no matter how much money is involved. The beneficiaries of an inheritance to not need to pay taxes
or report the money as income, at any level.
However, if a decedent's estate is worth more than $2 million (for 2007, this number changes in future years) the executor of the estate would probably owe estate taxes
on the amount above $2 million. This money is paid by the executor before any money is distributed to the beneficiaries.
Also, if any money in the estate comes from a 401(k), IRA, or some similar tax deferred account, that money is treated as taxable income to the beneficiary. Even receipt of $1 is taxable to the recipient. But this only applies in this very limited area.
There are a few states that impose an inheritance tax. They are: Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania and Tennessee. In most cases, these taxes are also taken by the estate, not directly from the recipient, but if you need details on any of these States, feel free to send a follow-up. You may also find this site to be a helpful resource:
I hope this helps!
Please keep in mind that information in this forum is for informational purposes only. It is not legal advice and does not constitute creation of an attorney client relationship. Before acting on any such information, you are always advised to consult with an attorney licensed to practice in your jurisdiction who can take the time to review all the facts and laws relevant to your situation.