Posted By:
Frank WakefieldHey JK...
I did do estate work in my legal practice. But I'm a state court district judge now. So I preside over probate matters in 2 counties.
If it goes into your estate it will be listed in an inventory, and will be assigned a value. States generally tax inheritance. Whoever gets it owes the tax, in theory. Most states exempt a surviving spouse from the tax. Many states vary the tax depending on the degree of relationship between the decedent and the beneficiary.
If the assets in your estate mount up to a sufficient level, the federal death tax would kick in...
As for the IRS, they would get involved, possibly, if you had some item insured for years and years, and then it is gone. For example, you had an original drawing by Mark Chagall. You've had it scheduled on your policy, listing it at its $30,000 purchase price through the 1990s, then you raised the insured value to $40,000 in 2002. In 2011 you increase that to $55,000. In 2012 you remove the Chagall from the insurance schedule. And you die in 2014 and there is no drawing anywhere. You had other works of art, and you routinely bought and sold art. The IRS would figure that if is not in your estate, and you filed no claim, then you must have sold the drawing in 2012 when you removed it from the insurance schedule. $55k - $30k = $25,000 in ordinary income on which you should have paid income tax in maybe 2012. So the IRS would not be likely to get involved for income tax purposes unless it is documented out there somewhere that you had the car... oops, the ART, and then you don't.