Every once in a great while you may find yourself on the receiving end on an estate. Whether it's your beloved grandmother's doll collection or an interest in property worth millions from your distant bachelor farmer great-uncle, there are certain things to keep in mind.
First, you likely do not need to worry about taxes. Taxes on the transfer of the property would have been dealt with through the estate tax, paid before you received the property. If you receive an inheritance that doesn't create income, you will not need to include it in your personal income taxes. However, if your inheritance generates income, for example if your uncle's farm is rented and you receive monthly checks, or if you sell that doll collection, you may have personal tax liability. In that case, you should work with an accountant to properly report that income or gain.
Second, you likely do not need to worry about debt from the estate. In the United States, debt cannot be inherited. Additionally, if the estate was administered through a probate process, debts should have been taken care of through that process. However, if a lien or other debt exists on the property and it wasn't paid off by the estate, you could run the risk of taking the property subject to that debt. If you believe this is the case, you should contact a licensed attorney in order to explore the possibility of disclaiming, or declining, that inheritance.
Finally, and this doesn't come up often but when it does it's extremely important, if you inherit from a distant relative in the old country, you need to contact a licensed attorney who is familiar with international estate planning. Unlike the United States, some other countries allow debts to be inherited. Most countries allow for a limited period to disclaim that debt, but only for a LIMITED period. You need to act quickly in determining whether you are inheriting debt and to disclaim that inheritance. If you don't, what you think will be a golden egg from Opa Fritz could turn out to be a major liability.
If you have received an inheritance and have any questions, including whether you will have a tax liability or whether you should disclaim the inheritance, contact a licensed attorney.