Are estate distributions taxable for individuals not mentioned in the will?

Forum|Forum|1 year ago
June 17, 2024
2 replies
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My sister's estate being probated intestate. Can the assets be distributed to relatives other than the intestate succession laws without being taxable?

TurboTax Online

M-MTax

Doesn't matter whether the individuals are mentioned in the will or not because an inheritance is not taxable with certain exceptions.....like retirement accounts.

mamulletAuthor

Thank you. Have a good one.

Bsch4477

Employee

You referred to a will and then wrote of intestate probate which means no will. In any event the distribution of assets must follow state law which would tell you what relatives can inherit. Inheritance is not taxed.

mamulletAuthor

Very good catch. Shows great attention to detail on your part. I definitely was unclear. Sorry.

It's complicated. (Famous last words.) There was a will but due to criminal activity relating to that will, (not by any of the relatives of the deceased), the will was nullified by the state jurisdiction. Thanks for clarifying.

Opus 17

Employee

Whoever the heirs are under state law will get their distributions according to the normal operation of inheritance law, even if they are not named in the will. That means that cash is tax free, property is inherited with a stepped-up basis, and qualified retirement accounts (IRA, 401k), are taxed on withdrawal as per normal.

If the heirs (under state law) make voluntary distributions to other family members who are not heirs under state law, those distributions are treated as personal gifts. If the gift amount is more than $17,000 (for 2023) or $18,000 (for 2024), then a gift tax return must be filed, but gift tax is not actually payable unless the total lifetime amount of gifts is more than $13 million.