My father passed away 4 yrs ago and he was settling a lawsuit. The lawyer that he dealt with is telling me that no one can come after me that he may of had owed debt to and that I will be granted x amount of dollars. Should I trust him? I know he is trying to collect for any money that was owed to him by my father, but don’t want to get screwed. Also what inheritance taxes am I looking at? He lived in NY and I live in PA. Besides the inheritance taxes, will I also have to pay taxes on this money at the end of the year?
You asked a lot of questions in your question. In general, estates may be subject to several types of taxes. The most common types of taxes that an estate could be subject to are 1. estate tax, 2. inheritance tax and 3. income tax. Estate tax and inheritance tax are generally due within 9 months of death, so if your father passed away 4 years ago, these tax returns were already filed.
The receipt of a settlement in a lawsuit is generally subject to income tax, with very few exceptions. I would recommend you contact the accountant and the attorney who handled your father’s estate. They will be able to recommend to you whether or not the settlement needs to be included as part of the estate. If so, the estate and inheritance tax returns may have to be amended.
However, even if the estate and inheritance tax returns do not need to be amended, the recipient of the settlement will probably have to file income tax returns on all or part of the settlement amount.
This answer does not constitute legal advice and does not and is not intended to create an attorney-client relationship. The law may vary depending on the state in which you reside. It is intended only to give some direction in which to seek assistance.
Circular 230 Disclosure: Pursuant to recently-enacted U.S. Treasury Department Regulations, I am now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.