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To pay my inheritance tax, should I use money from the sale of my house or withdraw from my investment account?

I am 57 years old and inherited a substantial IRA, investment account, and house from my 65-year-old fiancé. I will receive required minimum distributions (RMD)s from the IRA this year, enough to live comfortably on. To pay the 15 percent Pennsylvania inheritance tax, should I use money from selling the house I inherited, or withdraw money from the investment account I inherited? I am unfamiliar with managing investment accounts. Which option should I choose?

Estate Planning, Investing, IRAs, Real Estate, Taxes
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April 2018

First and foremost, I am very sorry to hear about the departure of your loved one. 

A few questions to ask yourself:

  • How much money do you need to cover the PA taxes?
  • Are you going to be needing cash to pay for a replacement home? If so, how much and will the proceeds of the sale cover the PA tax bill and the purchase of a new home? 

Personally, if I already had a home or if I were to purchase a new home, and could cover the inheritance tax with the house proceeds, I would use that strategy and let the investments continue to work for you.  To make it simple, use the house proceeds.

I hope this helps. 

April 2018
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April 2018