AS FOLLOW UP TO HARLEY HARRY'S QUESTION(BELOW POSTED):::confused:
If there was an inheritance from a Parent dying in PA and estate taxes were paid in PA ~ what are the liabilities in NJ ~ if any? If the estate taxes were not paid in PA ~ are there "double indemnities" for living in NJ and the transfer to? We are told by the Estate Atty we need to pay taxes on the IRA ~ approx over 100k..?.

jackson_angel

Harleyharry
New Member
Join Date: Mar 2008
Posts: 1

Inheritance Taxes
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Just curious. Each of 6 children received a $44,000 distribution upon passing of a parent. Does each adult child have a federal income tax obligation on any of the cash received? Thanks.

Mar 16, 2008, 11:32 PM
ebaines
Ultra Member

Join Date: Apr 2007
Posts: 1,373
Nope. There are no federal inheritance taxes - only estate taxes, which the executor of the estate is responsible for determining, and which if due are paid out of the assets of the estate before they are distributed to the heirs.

Sorry - I don't follow you. If the decedent lived in PA, then any estate taxes due are to the federal government and/or PA only. Not sure what you mean by "double indemnities" - please clarify. I believe NJ does have an inheritance tax - is that what you are asking about? Or is the issue something else - such as the mandatory distribution rules for an inherited IRA? There are rules about inheriting an IRA from someone other than your spouse that may force an automatic distribution (i.e. you can't roll the amount into your own IRA), and any distribution of pre-tax amounts and earnings from the IRA will be taxed, as ordinary income to you. So yes, you can end up paying quite a lot of tax as an heir when you inherit an IRA.

Here's a site that explains the issues of inherited IRAs better than I could - hope it helps:
You -- not IRS -- should benefit from an inherited IRA (http://www.bankrate.com/brm/news/ira/20041006a1.asp)