Legal Question in Wills and Trusts in Virginia

In terms of Federal tax law, inheritance is TAX FREE (to you).

Inheritance is not counted as income for the purposes of the Federal income tax. It is a gift. So you pay no income taxes anywhere in the United States on money that you inherit.

I believe that is also true for Virginia State income taxes, but I do not handle State tax issues so you should double check on this. I am very confident that you also do not pay taxes under Virginia State law, but you might check with a tax preparer:

SEE:

http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+58.1-322

However, if the person who dies and leaves you money has a VERY LARGE "estate" (total amount of money and property at their death), then THEY -- not you -- (even though they are dead) pay ESTATE TAXES.

Technically, you inheriting the money do not pay any estate taxes.

If you receive a check from the executor, you keep 100% of it tax free.

However, obviously, if the executor must first pay the IRS estate taxes, then this affects how much money you receive.

But you do not pay the taxes for the estate tax. The executor pays the estate taxes BEFORE you receive any money in inheritance. (If they do it correctly.)

Also, the person who died needs to be very, very rich before you have to worry about estate taxes. The amount keeps changing every year, but it is many millions of dollars.