Would I have to pay estate taxes on what my wife leaves behind?

Asked about 2 years ago - Durham, NC

My wife had a pension and 401(k) left to me. Do I have to pay estate taxes on these, or only income tax?


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Attorney answers (3)

  1. Cheryl K. David

    Pro

    Contributor Level 15

    2

    Lawyers agree

    Answered . Estate taxes are dependent on the size of the estate and the recipient. Since you are a spouse, it is unlikely that you will have estate tax. However, you will have to pay income tax.

  2. Gregory Herman-Giddens

    Contributor Level 14

    2

    Lawyers agree

    Answered . If you do not need the funds in the 401(k) right away and your are under age 70.5, you can rollover the 401(k) to an IRA in your name and designate your own beneficiaries. You will not have to take distributions and pay any tax until you are 70.5 and your beneficiaries will be able to stretch the remainder of the account over their lifetimes. This will minimize the income taxes and allow for maximum tax-deferred growth.

  3. James P. Frederick

    Contributor Level 20

    2

    Lawyers agree

    Answered . You will definitely need to pay income tax on these items. YOU would not need to pay estate tax on these items under current law, because anything inherited by a spouse is subject to an unlimited marital deduction. Upon your death, however, these items would likely be included in YOUR taxable estate. Whether or not there would be an estate tax due would depend on the value of your estate. As of today, the estate tax only applies to estates worth in excess of $5,120,000. If there are no changes, however, the exemption amount is scheduled to decrease to $1,000,000, as of January 1, 2013.

    You should definitely consult with an estate planning attorney to determine how best to structure your estate plan, in light of these issues. In particular, you want to make sure that you have General Durable Power of Attorney forms in place for financial and health matters. This will name someone to act for you, in the event that you ever become incapacitated.

    James Frederick

    *** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and... more

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