When you die will your children have to pay capital gains tax in addition to inheritance tax?

Answer 1

Whether they have to pay taxes depends on how the ownership of the property was set up in the first place. Some ways people arrange things are: trusts, both revocable and irrevocable, putting other names on property with right of survivorship, or as beneficiaries. It depends on what suits the owner and the type of property involved. You would need legal help to sort it out.

You certainly need to get some assistance because i believe you have some misconceptions on what tax may even be applicable upon inheritance.

This year (2010), is a very good year to die as there is no inheritance tax at all. And generally other years, an estate has to be over 1 mill before there are any...and even more important, inheritance tax is paid by the estate, not the beneficiary.

Remember, things that pass to a specific beneficiary, say a life insurance policy payable to Nephhew John, are NOT part of the estate anyway.

Generally - any money received as an inheritance is taxable as ordinary income to the recepient. There are a number of ways that may change, and the time period the money may be received over (become taxable), especially if it was part of a 401K or IRA of the decedent is a major consideration. In most cases, the recepient gets a stepped up basis in the assets and is responsible for appreciation from the time of death forward. Obviously, the recepient had NO basis in the property before death and could not have a capital gain on it.

again, a number of issues get involved here, and especially if it is a spouse, the rules become much more lenient. And there are considerations like gifts received by the recepient over the life of the decedent...which may have had gift tax paid (that is a tax paid by the one giving it) and have a credit available to be used.