# Are you legally required to accept an inheritance? How about a gift? **URL:** \ **Category:** Factual Questions\ **Created:** [December 19, 2012, 4:51pm UTC](https://boards.straightdope.com/t/are-you-legally-required-to-accept-an-inheritance-how-about-a-gift/644540 "2012-12-19T16:51:38Z")\ **Posts on this page:** 5\ **Page:** 2
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [December 19, 2012, 10:00pm UTC](https://boards.straightdope.com/t/are-you-legally-required-to-accept-an-inheritance-how-about-a-gift/644540/21 "2012-12-19T22:00:45Z")
> [@AuntiePam](#): > > They did indeed pay federal income tax on it, but now that I think about it (memory returns), the cash came from my brother’s 401-k, from his job. He hadn’t started collecting yet – the money was his retirement fund. > > That type of money might be treated differently than money from a bank account or life insurance. Yeah, that would be treated differently. When money is withdrawn from a 401k, whoever owns the account at that time owes money on the amount withdrawn. (But inheriting the account is not the taxable event). This leads to another example of splitting hairs about legal terminology - they’re paying taxes on the withdrawals, not on the inheritance itself. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 19, 2012, 10:15pm UTC](https://boards.straightdope.com/t/are-you-legally-required-to-accept-an-inheritance-how-about-a-gift/644540/22 "2012-12-19T22:15:37Z")
> [@md2000](#): > > IIRC, in the USA there is capital gains payable on the increased value between what the house (or other asset) was bought for, and what it sold for, minus improvements. It is payable by the estate. > > If grandson Joe wants to keep the family house, and the estate does not allow for paying the tax (“Joe gets house, Sally gets the cash in the bank account”) then Joe can either allow the executor to sell the house and take the net proceeds after taxes, or take the house, and pay the capital gains based on a fair appraisal of market value out of his pocket. Maybe this i what you are thinking of. No. In the United States, the federal income tax provides for a step up (or step down) in basis upon the death of the owner of a capital asset. For capital gains purposes, the basis is reset to the fair market value of the asset as of the date of death (or the alternate valuation date of the estate). The estate would NOT pay any capital gains tax unless it sold the asset and the value of the asset increased since the date of death. However, the estate may need to pay an estate tax (if applicable) based on the stepped up value of the asset. So for example, say grandma bought a house for $10,000 in 1960 which is now worth $1,000,000. If grandma moves into a nursing home today and gives the house to her beloved granddaughter, who then turns around and immediately sells it for $1,000,000, then granddaughter faces tax on a capital gain of $990,000. On the other hand, if grandma dies today and leaves the home to granddaughter who immediately sells it, there is no capital gain. If grandma’s total estate is under the current estate tax exemption amount, there would be no estate tax either. (However, state inheritance taxes might apply.) ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 19, 2012, 10:31pm UTC](https://boards.straightdope.com/t/are-you-legally-required-to-accept-an-inheritance-how-about-a-gift/644540/23 "2012-12-19T22:31:28Z")
> [@bizerta](#): > > No. However, it’s either all or nothing. One can’t reject one asset and not all the others. Cite? ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [December 19, 2012, 10:40pm UTC](https://boards.straightdope.com/t/are-you-legally-required-to-accept-an-inheritance-how-about-a-gift/644540/24 "2012-12-19T22:40:18Z")
> [@dracoi](#): > > Yeah, that would be treated differently. When money is withdrawn from a 401k, whoever owns the account at that time owes money on the amount withdrawn. (But inheriting the account is not the taxable event). This leads to another example of splitting hairs about legal terminology - they’re paying taxes on the withdrawals, not on the inheritance itself. Let’s just be clear, even if the 401k passes directly to a named beneficiary, its value is included in value of the estate for estate tax purposes. If the estate were large enough to be subject to estate tax but didn’t have enough assets to pay them, it is possible that the beneficiary of the 401k might have to return some of their inheritance. Of course, if the beneficiary is a US citizen spouse, the unlimited spousal estate tax exemption does apply. ---
**Author:** ![bizerta](https://avatars.discourse-cdn.com/v4/letter/b/3be4f8/32.png) [@bizerta](https://boards.straightdope.com/u/bizerta)\ **Post date:** [December 19, 2012, 10:46pm UTC](https://boards.straightdope.com/t/are-you-legally-required-to-accept-an-inheritance-how-about-a-gift/644540/25 "2012-12-19T22:46:46Z")
> [@Alley\_Dweller](#): > > Cite? I may have to withdraw that statement. One can refuse part of an inheritance in most states. [Previous page](https://boards.straightdope.com/t/are-you-legally-required-to-accept-an-inheritance-how-about-a-gift/644540.md?page=1)