People receiving an inheritance often ask us if that inheritance will be taxed. In most cases, no, inheritances are not taxable. Typically, the deceased person would have to have a net worth of 11 million dollars, or 22 million dollars as a couple before you have to pay inheritance tax. However, you could still be subject to estate income tax.

Inherited IRA

If you inherit an IRA, assuming it is not from a spouse, it will be taxable when you withdraw the funds. The funds have to be withdrawn from the account within 10 years of inheriting it. If it’s a Roth IRA, it’s not taxable, but you still have to withdraw the funds within 10 years.

Inheriting a Brokerage Account with Securities

If you inherit a brokerage account with securities in it, you get what’s called a step up in basis. This is a nice advantage to passing on assets through a brokerage account.

Inheriting an Annuity

We are not a fan of annuities. However, if you inherit an annuity, the gain that you’ve received in that annuity is going to be taxed at regular income.

Inheriting a House

If you inherit a house, you get a step up in basis. If I give money, do I pay a gift tax?: The answer by default is yes, unless the gift is less than $15,000. If you gift over $15,000, it will be taxed.

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Casey Smith
President, Wiser Wealth Management

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