I am at a loss to understand why this question would have been so difficult for anyone at H & R Block to answer for you because it is a rather simple question.
If you wait until the time your mother passes away and then you inherit her assets, your estimated tax liability
at that time would be zero, unless some of her assets are held inside of an IRA account or other tax deferred account. If that were the case, then you would owe regular income taxes
on that money only at the time it was withdrawn.
In the United States
, there is no inheritance
tax at the federal
level and the state of FL also has no inheritance tax. Instead of an inheritance tax, the US
imposes an estate tax
(or as you referred to it the "death tax"), but that only applies to estates which exceed a certain value. Currently that value is set a $3.5 million. For next year in 2010, the estate tax is repealed entirely. And then starting in 2011, the estate value drops to $1 million as the value which is exempt
. So as long as your mother's estate does not exceed $1 million, then you would never owe any estate taxes on her assets.
Also, if she owns a home or other real estate property that you will eventually inherit, then if you receive that property through inheritance, you will automatically receive a "stepped up" basis in the property at the time you inherit it. What that means is that your new basis in that property would be whatever the fair market value was on the day your mother passes away. And while you would not owe any inheritance tax on the value of the home itself, you would owe capital gains
tax if you sell the property, but the tax would only be on any gain you had from the sale. The gain would be figured by taking your selling price less your new stepped up basis. So as you can see, receiving a stepped up basis on property is quite an advantage, as you will not have to use your mother's original basis in determining the gain.
Because of the stepped up value which is allowed on property received through inheritance, it would not be recommended that you transfer any property to your name prior to her death. Doing that would be considered a gift, and with a gift you would retain the same basis as your mother currently has, which means you would have a much larger gain when you eventually sell the property.
This same stepped up basis applies to any stocks your mother may own. If you inherit stocks your new basis automatically becomes the fair market value on the day she passes away. So here again when you would sell those stocks, you would have a much smaller gain to pay taxes on.
As I said earlier, the only assets which might be subject to regular income tax would be if your mother as money inside of an IRA account or similar tax deferred account. Money in that type of an account would be taxable to you in the year you withdraw it becaus none of that money has ever been tax paid. But this is the only thing you would really have to pay tax on if your mother's estate is below the values I listed earlier in this post.
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Thank you Nittany and let me know if you have more questions.