Will My Kids Pay Taxes On The Money They Inherit

Hi there, my name is Bridget Mackay. I’m an attorney in Petaluma, California and I practice in the area of estate planning and elder law, and I had a question the other day from a client that asked, “Will my children pay taxes on the money that they will inherit from us when we die?” And the answer is, “No,” at least that’s the short answer.

When children or anyone, even if it isn’t your child, inherits money from another person, then there is no income tax that they have to pay that year that they receive it. There’s no tax at all that they’re subject to, generally speaking. However, if the person that gave it to them had an estate over the federal estate exemption amount, the estate may need to pay some taxes before distributing out to the heirs, or if you get… And I’m talking just cash, so if you get a distribution out of an IRA, so a parent had an IRA, it distributed out to the two kids, then the kids are going to take it as an IRA and when they pull the money out, it will be taxed at their income tax bracket.

The short answer is, “No, not generally on cash gifts, but there may be some taxes that are seen by the people who inherit your assets, depending on what the asset is and the value of your estate.” If you have any questions about that or you’re planning your estates, please talk to a qualified estate planning attorney in your area to help you. Thank you.

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