Are Inherited Funds Taxable? Understanding Inheritance Tax Basics

Photo Courtesy: Westend61/Getty Images

When the time comes that a loved one passes away, you might receive an inheritance of some kind. While the assets you receive do stand to assist you, financially speaking, you might also need to handle a few further financial matters related to your inheritance to ensure you comply with state laws. Often, inheritances are taxable. But whether you need to pay taxes — and the amount you could end up paying — are based on a variety of different factors.

The deceased's state of residence, your relationship to them and the amount you’re inheriting can all play a role in determining the taxes you may need to pay. Some beneficiaries of inheritances don't owe anything, while others need to pay a large percentage of the total value of the inheritance to the government. If you’ve recently inherited assets or stand to in the future, take a look at the details you need to know to determine whether your inherited funds are taxable — and to better prepare for the future.