There's a saying that nothing's certain but death and taxes: sometimes, in fact, they show up together. If your mother dies and leaves you money, you may not owe a cent on it. However, depending on the amount, where she lived and what she left you, the tax bite may be quite large.
As of 2013, seven states -- Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania -- impose inheritance taxes on residents. If you live there, your parent lives there or he left you property there, you may have to pay the tax. Some states, such as New Jersey, exempt you if you're inheriting from a parent. This applies if you're the biological child but also if you're an adopted, step- or mutually acknowledged child.
If your parent left an estate worth $5.25 million or more, as of 2013, that triggers federal estate tax. In states that impose their own estate taxes, a much lower value can trigger the state's estate's tax. You don't have to pay the tax yourself, but if your parent's estate has lots of debts and tax bills, you-- and everyone else mentioned in the will -- could wind up getting much less than your parent meant to give you.
Certain types of property have their own special rules. If, say, you inherit money in a traditional IRA rather than a bank account, you have to handle it carefully. An inherited bank account isn't taxable income, but whatever you withdraw from the IRA is. To minimize the tax bite, you have to transfer the money to a beneficiary IRA of your own, then start annual withdrawals. If you don't follow the IRS guidelines, the entire account becomes taxable immediately.
If you don't want the money, or you think another member of your family needs it more, you can disclaim it. A disclaimer is a written statement you give to the executor of the estate that says you don't want your inheritance. It passes to one of the other heirs, and legally you never take ownership. Because you don't own it, you also don't pay any associated taxes on the money.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.