Q&A: Heirs need a pro to sort our tax issues

Dear Liz: I know that when a person dies, their beneficiaries typically will inherit a home or other real estate at the current market value with no taxes owed on the appreciation that happened during the person’s lifetime. Does that hold true for stocks as well?

Answer: Usually, yes, but there are some exceptions.

If the stock is held inside a retirement account such as a 401(k) or IRA, and that retirement account is bequeathed to heirs, withdrawals will be subject to income tax. The same is true for investments held within variable annuities.

Inheritors also may owe capital gains taxes on a stock’s appreciation if the stock is held in certain trusts, such as a generation-skipping trust.

And even when no taxes are owed on the gain that happened during someone’s lifetime, there may be taxes due on the gain that happens after someone inherits the stock or other property, said Los Angeles estate planning attorney Burton Mitchell.

If you’re expecting an inheritance, you’d be smart to consult a tax pro so you understand the tax bill that may be attached.

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Comments

  1. Rebecca Benavidez says

    I have 2 pensions from private sector companies and collect almost $2,000 from SS. My husband is a retired US Postal employee and collects almost $150 from SS. We just found out that if I pass before my husband he will not be able to collect my SS which is so much more than his as it is considered “double dipping”. Is this true? I’m sure the people in congress doing have the same constraints.