I'm about to inherit some money from my Grandmother. I live in VA and
she lived in MD. My question is, what taxes will I have to pay and how
do I find out more about how much they are and how to pay them? Do I
pay estate tax for both states? Income tax for both states? The amount
is less than 20k. 

Dear crom654-ga

Thank you for your estate tax question. 
Since tax issues are very complicated I 
would strongly recommend that you contact 
a professional to assist you with your taxes.

My research has provided me with some information that 
might shed some light on this subject. 

In short the state Of Maryland imposes estate taxes on 
properties starting at $750,000 and up. In Virginia the 
limit as of January 1, 2002 begins at $700,000 and up. 

For federal Income taxes, depending on your particular circumstances,
you will need to read the form 706 or may also need form 709 and
publication
950 to help with regards to federal income taxes and the IRS.It
appears
that for the year 2001 amounts below $675,000 are exempt from federal
income
taxes and in 2002 that amount increases to $1,000,000.

So for an estate of less than $20,000 you should not owe any state or
federal
income or estate taxes.

You may call the IRS at: 1-800-829-3676 to order these
publications or use the links below to download from them 
from the Internet.

If you are the executor of your granmother's estate then 
in Maryland the will of a resident is handled through the 
register of wills and the paperwork is processed at the 
county or city level. 

As a non-resident you will need to approach the local court house 
and bring your grandmother’s last bank statement along with a 
copy of the will, the death certificate and funeral expenses 
account along with someone you will be appointing as your in state
agent.

The state of Maryland (MD) requires that you appoint a MD resident 
as “Agent n Residence” to enable the local authorities to contact you
if the need arises. You can still complete all the necessary paperwork
yourself.


State of Maryland Estate Tax table:
http://taxpros.marylandtaxes.com/faq/estatetax/q2.asp

State of Virginia Estate Tax table:
http://www.tax.state.va.us/estate.htm

Register of Wills state of Maryland:
http://www.registers.state.md.us/html/pamphlet2.html

Register of Wills Downloadable Forms:
http://www.registers.state.md.us/html/disclaim.html

IRS Ruling on Estate taxes and tax table:
http://www.irs.gov/pub/irs-pdf/p950.pdf

IRS publication 950 in PDF format:
http://www.irs.gov/pub/irs-pdf/p950.pdf

IRS Estate form 706
List of various 706 forms:
http://search.irs.gov/pub/query.html?col=catpdf&charset=iso-8859
1&ht=0&qp=&qs=&qc=&pw=100%25&ws=0&la=en&qm=0&st=1&nh=10&lk=1&rf=0&oq=&rq=0&si=0&qt=706



Additional useful information about estate taxes:

“Thirty-five of the 50 states currently have an estate tax that equals
the amount of the state credit, with there being no other state estate
or inheritance tax.
In these states, the state law refers specifically to the amount
allowed as a credit against the federal estate tax. This is commonly
referred to as a "pickup" tax. A pickup tax provides revenue to the
state but does not increase the federal estate tax payment the heirs
must make. Instead, the estate's federal estate tax liability is
reduced by the amount of the state tax payment. Some 15 states also
have their own inheritance or estate taxes, a portion of which
qualifies as a pickup tax.
In all of these 15 states, the state laws specify that if the amount
of the state tax is less than the credit allowed against federal
taxes, the state tax be increased to the amount of the credit. In
cases where the state liability is greater than the credit, federal
estate taxpayers receive a credit for the portion of their state tax
that equals the maximum allowable credit.”


From Inheritance Tax rates:
http://www.deathinsurance.net/inheritancetaxchart.htm

For Additional information please see:

State of Virginia Department Estate Taxation:
http://www.tax.state.va.us/estate.htm

State of Virginia Department of Taxation Home page:
http://www.tax.state.va.us/ 

State of Maryland Estate Tax section:
http://taxpros.marylandtaxes.com/guides/estatetax/

State of Maryland taxation Department Home Page:
http://www.marylandtaxes.com/default.asp

I hope I have been able to provide you with some useful information
and contact me if you require further clarification(s)

All the best
Seeker

Whether you inherit thousands or millions, you pay no tax on what you
get.

"Gross income does not include the value of property acquired by gift,
bequest, devise or inheritance."  Internal Revenue Code Section 102.

 (There's an exception for "income in respect of a decedent" so for
example if you inherit a decedent's IRA account you will pay income
tax on that.  Internal Revenue Code Section 691.)

Estate tax is not a concern either, because whatever estate tax was
due was the obligation of the executor (Internal Revenue Code Section
2002).  In effect, the inheritance is paid to you by the executor from
what remains in the estate after all estate and succession taxes have
been paid.

Thanks for the comment. 

Are you guys really saying that I won't have to pay 'any' income tax
(fed or state) on this 0 to 20k I will inherit? Sorry to be so dense.

The previous comments you have received are true and correct, but the
best way for you to find out definitely whether or not you will have
any tax liability is to consult with a local CPA or tax accountant who
is knowledgeable about both state and federal tax laws.  They work
with situations like yours every week and you would feel much more
comfortable with their answer.

You would not pay ESTATE tax, the executor is responsible for that,
but you would only pay state taxes in the state where you live.