My mom (currently in hospice care) is concerned about money issues because she saw a commercial on TV about gifting vs. your beneficiary paying taxes. Although she has a recent Will, she wants to know how much each of us will have to pay in taxes once our inheritance is distributed. We each stand to receive about 25 to 30,000 and for some reason she thinks we'll have to pay 42% tax. She is asking about gifting but I don't really have the answers. To be honest, the end is very near and I don't know what to tell her nor do I know if we have time to accomplish anything. She's trying to protect us from being overtaxed (on money she worked hard for and already PAID taxes on). She's pretty distraught and seems to be worring about end-of-life issues. I'd like to put her mind at ease.

The short answer is that for estates valued at less than $3.5M for 2009, there is no tax. I assume that will cover her estate.

I hope this will help put her mind at ease.

First, the heirs to an estate do not pay tax, the estate pays the tax.

Second, as your first response pointed out, the first $3.5M is exempt from taxation. So, if you are talking about you each getting $25-30K, unless there are a lot of you, there shouldn't be any taxation.

The short answer is that for estates valued at less than $3.5M for 2009, there is no tax.

The state she lives in may have an inheritance tax. That may well have an exemption too.

Also, under present federal law, you should be aware that "... the estate tax is repealed in 2010, but then the act "sunsets" in 2011 and the estate tax reappears with an applicable exclusion amount of only $1,000,000 (unless Congress acts before then)." http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States