Quick Answer
Yes — inherited cash and property are generally tax-free for the beneficiary in the U.S. Inherited retirement accounts (traditional IRA, 401(k)) are taxed as ordinary income when withdrawn — you must distribute within 10 years. ITIN holders inherit identically to SSN holders. Steps when you receive an inheritance:
- Cash/property: no federal tax owed — keep the full amount. Five states have a state inheritance tax; check your state.
- Inherited IRA/401(k): open an Inherited IRA at Fidelity, take distributions over 10 years to spread the tax burden — see IRS RMD rules.
- Inherited property: you receive a stepped-up cost basis — if you sell immediately, capital gains tax is near zero.
How Is an Inheritance Taxed for ITIN Holders?
For ITIN holders, inherited cash and property carry $0 in federal tax — you keep the full amount. Inherited retirement accounts like an IRA or 401(k) are taxed as income on withdrawal, and most non-spouse heirs must empty the account within 10 years. Only 5 states levy a separate inheritance tax, and the rules apply to ITIN holders identically to SSN holders.
Inherited cash/property: $0 federal tax. You keep the full amount.
Inherited retirement accounts (IRA, 401k): Taxed as income when you withdraw, and most non-spouse heirs must withdraw everything within 10 years under the SECURE Act — see the IRS rules for inherited retirement accounts.
State inheritance tax: Only 5 states have it (Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania). If the deceased lived elsewhere, you're safe. ITIN holders already pay an estimated $8,889 per person per year in taxes (ITEP), and inheritance rules apply to them identically to SSN holders.
How Do I Claim an Inheritance as an ITIN Holder?
You claim an inheritance as an ITIN holder in 4 steps: gather the will, death certificate and any probate court letter; let the lawyer or executor handle the probate or trust transfer (banks accept an ITIN as ID); roll any inherited retirement account into an inherited IRA with an RMD schedule; and file taxes with a pro who reports the amounts.
1. Get documents: Will, death certificate, probate court letter (if applicable).
2. Probate or trust transfer: Lawyer or estate executor handles paperwork. ITIN holders can inherit—banks accept ITIN as ID.
3. Inherited retirement account? Roll to "inherited IRA" and set up Required Minimum Distribution schedule.
4. File taxes: Consult tax pro about reporting inherited amounts, RMDs, and any income generated.
What Challenges Do ITIN Holders Face When Claiming an Inheritance?
ITIN holders face mainly 3 challenges when claiming an inheritance, none of them a dealbreaker: probate courts may ask for an SSN, but most accept an ITIN as alternative ID; some banks want an SSN for inherited account access, yet an ITIN is acceptable; and ID concerns make hiring a lawyer worthwhile to navigate probate smoothly.
Probate courts: May ask for SSN. Provide ITIN as alternative ID. Most accept it.
Banks: Some want SSN for inherited account access. Again, ITIN is acceptable.
Lawyer helps: Worth hiring for probate navigation if you don't have SSN/concerned about ID issues.
What Are the RMD Rules for Inherited Retirement Accounts?
If you inherit an IRA with a $100k balance as a non-spouse beneficiary, you generally must empty the account within 10 years of the owner's death, with each withdrawal taxed as ordinary income. If the owner had already started RMDs, you also take a minimum in years 1 through 9. Missing a required distribution triggers a penalty of up to 25% under 2026 rules.
A spouse or other eligible designated beneficiary can instead stretch withdrawals over their lifetime, so a tax professional should set up the withdrawal schedule.
If you inherit an IRA with a $100k balance as a non-spouse beneficiary:
- Empty the account within 10 years of the owner's death
- Annual RMDs apply in years 1–9 only if the original owner had already started taking them
- Each withdrawal is taxed as ordinary income
- Miss a required distribution? Penalty up to 25% on the shortfall (2026 rules)
Consult a tax professional to set up the withdrawal schedule correctly.
Frequently Asked Questions
Is inherited money taxed?
In most cases you do not pay federal income tax just for receiving an inheritance. But inherited retirement accounts (a traditional IRA or 401(k)) are taxed as you withdraw, and very large estates may owe estate tax before assets are distributed.
Can ITIN holders inherit money or property?
Yes — inheriting assets is a legal right regardless of immigration status. You may need an ITIN to handle the tax reporting on inherited accounts or income.
What are RMDs on an inherited retirement account?
Most non-spouse heirs must empty an inherited IRA or 401(k) within 10 years, and some must take annual required minimum distributions during that window. Withdrawals from traditional accounts are taxable.
What should I do first after inheriting?
Do not rush. Park the money somewhere safe, understand how each asset is taxed, and avoid lifestyle inflation. For retirement accounts and larger estates, a tax professional is worth the cost.