Hi, My father recently passed away and left 50,000 dollars to shared by 4 of his children,The lump sum is to go to my brother and he is to distribute it equally,He say's about 33% has to go to federal and state taxes,We live in Ohio,can you tell me if that is true? Thanks so much...

ScottGem

Umm no. An estate that small is generally under the inheritance tax threshold. The following is from a wikipedia page on estate tax:

http://en.wikipedia.org/wiki/Estate_tax_%28United_States%29#The_.22gross_estate .22

However, the law then provides for a credit against the tentative tax. The credit may be thought of as providing, in effect, for an "exemption equivalent" or exempted value with respect to the value of the property. For a person dying during 2005, an estate with a value less than $1,500,000 would not pay a federal estate tax and most likely would not have to file a federal estate tax return. The applicable exclusion amount increases to $2,000,000 for decedents dying in the years 2006, 2007 and 2008.

So, as you can see, there would be no federal tax on $50K and no need to even file a return.

Was the estate probated? If it was that small, it might not have even gone thru probate.

CaptainForest

I agree with Scott.

On an estate that small in the USA, no taxes have to be paid on it.

It sounds like your brother is just trying to get more of the pot for himself.

AtlantaTaxExpert

Not so fast.

Many people believe that they owe income taxes on inheritances, which is not the case.

Your brother may have operated under that mistaken impression.

ScottGem

That's what I thought, you pay inheritance tax, which in itself is double dipping since the money was taxed when it was earned. To assess an inheritance tax AND then tax it as personal income would really be double dipping.

One other point, if that's what the brother was thinking, then it would be the responsibility of the recipient to put aside the money to cover any income tax liability. It wouldn't be up to the executor. So all the brother has to do is take his calculator, divide by 4 and write the checks.

CaptainForest

I agree.

All he has to do is divide it in 4, not collect everybody's taxes.

That is why I think that perhaps he is trying to get some extra money for himself. Just my opinion obviously, I do not know for a fact either way.

AtlantaTaxExpert

Points taken!

IMHO, the brother is up to no good, but misinterpretations of tax law is so common, I had to point out the possibility.