Check with IRS about estate tax on inheritance

January 10, 1993|By Knight-Ridder News Service

Your long lost uncle has died, making you beneficiary of his life insurance policy.

Before rushing to spend that inheritance, it may be wise to check with the Internal Revenue Service.

Consider this tale of woe:

Two brothers received the proceeds from their father's life insurance policy. The money came directly from the insurer and did not pass through the executor, though it was part of the taxable estate.

Years later, the IRS called with bad news. No tax was ever paid on the father's estate, and the brothers would have to pay.

The case eventually found its way into Tax Court, where the IRS won.

Because the insurance money was part of the father's estate, the sons could, indeed, be held liable for the entire estate tax due, up to the limit described.

Never mind the fact that the insurance proceeds were only part of the estate, or that the executor was responsible for collecting and paying the tax. The verdict would stand.

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