Beneficiaries do not pay taxes on bank accounts or the money they receive from those inherited bank accounts.
Generally, when you inherit money it is tax-free to you as a beneficiary.
This is because any income received by a deceased person prior to their death is taxed on their own final individual return, so it is not taxed again when it is passed on to you.
Inheritances in the form of cash are not taxable to the recipient at the federal level, so the money in the savings account that you are inheriting from your father is not taxable to you nor do you have to report it on your federal tax return.
Money or property received from an inheritance is typically not reported to the Internal Revenue Service, but a large inheritance might raise a red flag in some cases.
When the IRS suspects that your financial documents do not match the claims made on your taxes, it might impose an audit.
If the estate is the beneficiary, income in respect of a decedent is reported on the estate's Form 1041.
If the estate reported the income in respect of a decedent on its income tax return, you don't need to report it as income on your income tax return.
If there's inheritance tax to pay, the court won't issue the grant of probate until it has been paid.
Not all estates will need to pay inheritance tax, depending on how much the person owned and who it's being passed on to.
What to do if you inherit money.
If you inherit a large amount of money, take your time in deciding what to do with it.
A federally insured bank or credit union account can be a good, safe place to park the money while you make your decisions.
Paying off high-interest debts such as credit card debt is one good use for an inheritance.