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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4021
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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January of this year my Mother-in-Law passed away and I received

Customer Question

January of this year my Mother-in-Law passed away and I received 50% of the proceeds from two Annuities the other 50% went to her son.

Question: I was informed that I would not be subject to Federal Inheritance Tax but might be Taxed on this inheritance in the State of New Jersey.

The Annuity Co. stated that since the benefit came directly to me the benefit is not included in the gross estate and it's exempt from inheritance tax but subject to income tax.

PLease clarify.

Thank you.

Mike Dashio XXX@XXXXXX.XXX

Much appriciated
Submitted: 3 years ago.
Category: Tax
Expert:  Stephen G. replied 3 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

First of all there's no Federal ESTATE tax for deaths in 2010. You most likely will be subject to income tax on at least a portion of the annuity proceeds, the annuity company can tell you how much. As far as New Jersey goes, what is the amount of the annuity payment(s) that you received? What the annuity company probably meant to tell you was that since you were a beneficiary under the annuity, the annuity was not part of the PROBATE estate; it would however be part of the taxable estate, but may or may not be subject to NJ estate and/or inheritance tax.

Stephen E. Grizey :

Note that's a difference between inheritance (taxed to the recipient) & estate taxes (taxed to the estate).........depends upon the amount & whether NJ follows the Federal rules or not..........I'll check on this as soon as you give me the amounts......

Stephen E. Grizey :

Do you understand?

Stephen E. Grizey :

Was your mother-in-law a resident of NJ when she died?

Customer :

Yes. The total value received from the two annuity's was $27,517.00.

Customer :

She was a NJ resident

Stephen E. Grizey :

ok, just a minute.........

Stephen E. Grizey :

Did your spouse also inherit anything or isn't she alive or what were the circumstances? If she had inherited the annuity there would have been no inheritance tax. Also, not that the 10% "penalty" you speak of is actually interest computed at the rate of 10% per year, not a 10% penalty a month.

Customer :

My wife did not inherit any benefit

Stephen E. Grizey :

OK, then you will have the 15% inheritance tax, as well as income tax depending upon how much of the annuity proceeds are taxable for income tax purposes, which the annuity company will have to tell you; there should be no estate tax that you have to be concerned about as you would be unable to determine it without knowing the entire value of the estate, not just what you inherited.

Stephen E. Grizey :

Please remember to click on the Accept button & thanks for using our service.

Stephen E. Grizey :

If you have any follow-up questions, I'll be happy to answer them.

Stephen E. Grizey :

thanks very much..........note......the reason I asked about your wife is that if she were deceased, as her surviving widower you would not be subject to the inheritance tax ..........

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4021
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and other Tax Specialists are ready to help you

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