Things You'll Need
Instructions
1Hire an attorney if the inheritance is considerable or if there is a dispute among heirs. This applies only in the 11 states that levy inheritance taxes: Connecticut, Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania and Tennessee.
2
Calculate the total amount of your inheritance. Include cash, securities, property, investments and other assets, such as life insurance benefits. You may need to have physical assets, such as property, jewelry and collectibles, appraised.
3
Figure out whether or not you are responsible for any inheritance taxes. This consideration is based, in most cases, on two factors: the amount of the inheritance and how you are classified for tax purposes. Most close relatives -- spouses, children and siblings -- are considered "close" or "Class A" relatives and are usually exempt from any tax payment despite the size of the inheritance. Again, this varies from state to state, so check with state tax laws.
4
Calculate what you owe based on your state's inheritance tax laws. Kentucky, for example, while exempting close relatives from inheritance tax obligations, has developed a table for two other classes of taxable heirs. Relatives such as nieces and nephews, sons- and daughters-in-law, aunts and uncles, and step-children are classified as Class B beneficiaries. They are taxed on amounts beginning at $1,000 and the tax rate increases from 4 percent to 16 percent. There also are included flat-amount payments, so that a recipient of $200,000 to $500,000 would owe $70,960 plus 16 percent of the amount over $200,000.
5
Locate the state tax form that applies to your situation. Kentucky, for example, provides four tax forms for different classes, although a simple "Affidavit of Exemption" can be filed for exempt close relatives. Most states provide forms online, along with accompanying schedules, tables and instructions.
6
Complete the appropriate tax form. You may have to file several forms. Iowa, for example, requires separate forms for differing inheritance items: one for real estate, another for stocks and bonds, others for cash, insurance policies and other items. Personal information will be accompanied by attachments, copies or other documentation.
7
File the forms, either electronically or by mail. No matter how you file, make sure to make copies for yourself. Some states may allow for online filing but require hard copies of some or all documents and attachments. Again, an attorney at this point may be highly beneficial, even just to review your own work, especially with large inheritances. Include payment if necessary, or utilize the state's grace period.