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Do I have to pay estimated taxes on inherited money I expect to receive in 2016

Forum|Forum|6 years ago
June 1, 2019
8 replies
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I reside in New Jersey.

TurboTax Premier Online

Best answer by rjs

If you inherit cash that is not in an IRA or other retirement account, the inheritance is not taxable income and you do not report it on your tax return. Since it's not taxable income, there is no need to pay estimated tax. However, any income you earn by investing the inheritance after you receive it, such as interest or dividends, is taxable income. If the investment income will be substantial, you would have to take that into consideration in either adjusting your withholding or paying estimated tax.

If the person you expect to inherit from lived in New Jersey, the bequest might be subject to New Jersey inheritance tax. This is beyond the scope of what TurboTax handles. Normally the estate would pay the inheritance tax before any money is distributed to the beneficiaries. But if you are not the spouse or a direct descendent (child or grandchild) of the person you expect to inherit from, you should consult the executor or a local tax professional to determine whether you will have to pay NJ inheritance tax.

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karolAuthor

I am an adult child of the decedent, a beneficiary not the executor.

fanfare

Are you the executor, or beneficiary? and what is your relation to the decedent?

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SweetieJean

Then please see the answer from rjs below.

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karolAuthor

I do not want to rely on the executor to tell me about taxes. Also, I already cashed out my portion of a trust instead of transferring it to a brokerage account which I know I will owe tax on the capital gains, but I do I have to pay estimated tax? I have filed my taxes with Turbo Tax for many years but never done any estimated tax. I was hoping to continue doing my own taxes and not need to pay an accountant just because of inheritance.

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karolAuthor

The IRS info I found seems to include help for the executor not a beneficiary.

rjs

The trust adds complications. It's not just a simple inheritance. You should go to a local tax professional who can determine what kind of trust it is (or was) and what the tax effects are. Whatever you have to pay the tax pro will be well worth it to avoid problems later on.

VolvoGirl

Depends what you got and if you get any tax forms for it at the end of the year like a schedule K-1 from the Estate or Trust or a 1099R if it was from a 401K or IRA or a retirement plan? It may or may not be taxable income to you.

rjsAnswer

If you inherit cash that is not in an IRA or other retirement account, the inheritance is not taxable income and you do not report it on your tax return. Since it's not taxable income, there is no need to pay estimated tax. However, any income you earn by investing the inheritance after you receive it, such as interest or dividends, is taxable income. If the investment income will be substantial, you would have to take that into consideration in either adjusting your withholding or paying estimated tax.

If the person you expect to inherit from lived in New Jersey, the bequest might be subject to New Jersey inheritance tax. This is beyond the scope of what TurboTax handles. Normally the estate would pay the inheritance tax before any money is distributed to the beneficiaries. But if you are not the spouse or a direct descendent (child or grandchild) of the person you expect to inherit from, you should consult the executor or a local tax professional to determine whether you will have to pay NJ inheritance tax.