You might elect to refuse or disclaim a bequest made to you and have it pass to the next beneficiary such as a child or sibling.
I’ve done this with life insurance policies in very large estates where the spouse was the beneficiary and the children were the secondary beneficiary. Was better than having it taxed when the spouse died.
The problem with IRS debt is that it never goes away, and the late penalties and interest make it grow faster than most can pay it off.
The best thing you could do is make a deal with the IRS (which they do daily) for a short payoff and use your inheritance for that.
The only way out of IRS debt is to pay it off. Otherwise it will be larger every year even as you make payments.
Or, go completely underground, don’t use banks and only work for cash. That’s a crappy life too.
by the way, check out if the IRS can “garnish” an “IRA”
If not then open a Roth IRA at Vanguard, fund it with whatever you can afford to let go of and put it into a “Target Retirement Fund”. In your case low risk VTINX.
Mind you you can fund an IRA if you make over a certain threshold so like b4 ..quit screwing around, bite the bullet and make an apnmt with a pro and ask these questions. No HR Bock.
Pay now or pay later.
Buy gold.
You need a tax lawyer.
In what form is the inheritance? Straight out cash? An annuity (qualified or non-qualified)? A traditional, Roth, or SEP IRA? Stocks or bonds? Gold? Real estate holdings? Have there been earnings on the inheritance since her death, or even before her death (principal and pre-death earnings could be treated differently depending on the investment)?
The status at your sibling’s death would determine how you are treated taxually (like my new word?).
A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000 for decedents dying in 2009; and $5,000,000 or more for decedent's dying in 2010 and 2011 (note: there are special rules for decedents dying in 2010); $5,120,000 in 2012, $5,250,000 in 2013, $5,340,000 in 2014, $5,430,000 in 2015, $5,450,000 in 2016, $5,490,000 in 2017, and $11,180,000 in 2018.
You could put it in crypto currency (BitCoin, Bitcash, etc.). They don’t have a way to seize wealth kept that way as long as they don’t have your key. That doesn’t mean you don’t owe them. It just means they can’t take it without you giving it to them. It is perfectly legal to buy crypto currency.
The inheritors don’t pay taxes. The decedent does. If the assets are other than cash, your basis is the value upon transfer.
MOST people are way, way under the limit. $20k doesn’t come close.
The estate would need to be more than a million. But you should spend $200 and sit down with a lawyer just to verify.
Set up a trust casts about $1,200.
The real problem isn’t dying, it’s living. If you need to go on Medicaid for late in life nursing care, the government will take whatever liquid assets you have and put a lien on any tangible assets like a home to recoup the expense.
Or living in a high-cost assisted living center accomplishes the same thing; they exist to take all of your estate.
As other posters have noted, you need to consult an attorney, estate planner or CPA about how to shelter your assets. Beware the preferential transfer rule.
Is this cash or are items of value being distributed? House? Stocks? IRA’s? Cash being paid to you in the form of a check is not taxable and does not require reporting at this level of accumulation but, items being converted to cash will draw attention.
Both you and your sister should talk to a qualified advisor.
It is my understanding that when you die, your educational loans are forgiven.That may not be an option you would choose, but I am 84 yo and I do not expect to live long enough to pay off my student loans.
Talk with a professional about a self-directed, spendthrift trust.
Consult a CPA or attorney who does tax controversy work, and see if you can make an offer in compromise or at least set up a payment plan. Unless your tax liability is about to abate due to age (generally the IRS has 3 years to assess, and 10 to collect after assessment) you need to communicate with the IRS and most likely pay them something. If you don’t do so voluntarily, the IRS will take payment from you. They will know you are receiving an inheritance, because the executor your sister’s probate estate will have to file a tax return for the estate.
Go talk to an accountant.
I think you are our of luck. Before she died your sister could have set it up to go into a trust and pay you a little each month. At this point it’s yours and the IRS is likely entitled to take it.
CASH CASH CASH always deal in COLD HARD CASH!!!
Get a treasure box, fill it with cash and hide a few instructions on how to find it in your documents that get released to your next of kin when you bite it...
That method has a better chance of passing stuff on than anything that has to pass by the greedy hands of the federal tyranny...errr government.
Create a trust. Trusts are a powerful legal tool, unique to our laws.
PFL.