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My mothers estate is almost settled. All assets including the sale of the home, insurance, investments, and bank accounts were converted to cash by the trust and then will made payable in cash to three children. The trust also made a tax payment. How much cash can I receive tax-free before I have a Federal and North Carolina tax liability?


Expert Cory Bunger's Answer:

You do not pay tax for receiving an inheritance.  However, you would be responsible for paying the tax on any income earned in the trust that is passed to you in the final year of the trust's existence.  The trust will file a tax return (Form 1041), and you will receive a K-1 showing how much income you must report on your personal return.


For example, if the home was sold for $300,000, and $30,000 of the proceeds were considered capital gain, then you would receive $100,000 as your 1/3 share of the trust, and you would also have to claim 1/3 of the capital gain.  Of the $100,000, you would be responsible for claiming $10,000 as capital gain on your personal income tax return.  There is no tax liability for the remaining $90,000 you received.   

Cory Bunger, CPA

North Carolina

17 yrs experience

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