The Pennsylvania inheritance tax is a tax on the privilege of receiving someone’s property after they have died. Unlike the Federal estate tax, which applies to certain larger estates, the Pennsylvania inheritance tax applies regardless of an estate’s size. The range of property subject to this tax is very broad, including:
- All real and tangible property, located in Pennsylvania at the decedent’s death (real estate, cash, automobiles, furniture, jewelry, etc.);
- All intangible property, regardless of where it is located at the decedent’s death (stocks, bank accounts, loans receivable, annuities, and living trusts, including direct beneficiary, I.T.F. (“in trust for”), and P.O.D. (“payable on death”) accounts); and
- Any fractional interests in jointly-owned property gained through the right of survivorship, except between husband and wife. (Even where a decedent’s name was added merely out of convenience, the joint property is taxable for inheritance tax purposes. If the decedent created the joint interest within a year of his or her death, the full value of the property will be taxed as though part of the decedent’s estate.)
The amount of inheritance tax owed is calculated by multiplying the value of the property received by the rate determined by one’s relationship to the decedent. The five general inheritance tax rates are as follows:
- Spouse (0%)
- Charity (0%)
- Lineal Relation (4.5%): parents, grandparents, children, grandchildren (natural, adopted, step)
- Siblings (12%): brothers, sisters, half-brothers, half-sisters
- Collateral Relations (15%): friends, cousins, nieces, nephews, etc.
There are, however, several factors that may be applied to reduce the amount of inheritance tax owed. These factors include deductions for certain expenses paid by the estate, limited exemptions, and a discount for early payment. If you are the personal representative (executor or administrator) of an estate, it is your responsibility to file the inheritance tax return. If no personal representative has been appointed, this responsibility falls on each person who inherits property from the decedent. Regardless of who must file, the inheritance tax return must be filed within nine months after the decedent’s death.
If you have inherited property from a friend or loved one or have been appointed the personal representative of an estate, our inheritance tax lawyers can help assess and minimize your tax liability, prepare the appropriate inheritance tax forms, and file your return. For assistance, call Keen Keen & Good at 610-383-7810 today.