I am going to receive a fairly large amount from my parents estate. The estate has put money aside for tax liability but I assume I will have additional taxes to pay. I live in New Jersey. Is there any advantage to not taking the check this year and waiting until next?
"Secretagentman" wrote
No one here is going to know what the make-up of the estate is. So ask the executor of the estate how much of what you will be receiving is going to be taxable (part of the distribution may be income earned between the date of death and the date of distribution). They should be able to tell you within a few bucks the amount and types of income (interest, dividends, capital gains (yeah, they can happen in an estate), etc.
Armed with that info, you can then decide what you need to do about taxes. I doubt you have a choice in which year to report the income, even if you have a choice of which year to receive the disbursement.
Disbursements from an estate are not, in themselves, income. They are not taxed, so it does not matter. Estate taxes are paid by the estate before disbursal.
Income earned by the estate between death and disbursal is a different issue. If the estate is not settled at the end of the tax year, the estate pays income taxes on this income at a high rate. When the estate is disbursed, the income can be passed through to the heirs on a Schedule K-1. This income is then taxed as part of the heirs tax return. Often, this taxation is at a lower rate than the estate's tax rate. Thus the heir ends up with more money. This means that there is an advantage in closing the estate in this tax year rather than the next.
Inheritances are non-taxable to the recipient -- as you say, the estate may owe some, but it's the responsibility of the executor of the estate to take care of that, not the beneficiaries.
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