NEW YORK ( MainStreet) -- Losing a person in your life is difficult enough without having to figure out how to hold on to what they left you.The approaching tax season only brings more worries for those who've lost a friend or loved one and received an inheritance for their trouble. That last gift from mom, dad, the grandparents or anyone else in your circle can seem like a touching gift at first, but can also incur serious penalties for heirs unsure how to handle it.
|Estate tax and inheritance tax laws written in Washington and state capitals can take a bite of what's left behind, but they don't have to.|
When President Barack Obama and Congress passed the Tax Relief Act of 2010, it not only extended the Bush tax cuts but implemented a federal estate tax that bumped up the exclusion from $1 million to $5.1 million while dialing down the tax rate on funds beyond the threshold from 45% to 35%. Heirs who think they're under that $5.1 million mark based on their best guess of what the combination of the estate's cash and property is worth really should hold off on earmarking that cash for the beach house or kids' college fund. Nothing's certain until the formal appraisal takes place.