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What You Need To Know About Estate Tax Planning

March 23, 2021

What You Need To Know About Estate Tax Planning

When a loved one dies, you may become a beneficiary to assets of their estate which hold significant value. While these are meant to be things passed along with good intentions, in reality, they can hold large tax values that you as the beneficiary must take on. This is why it’s crucial to understand estate tax planning in Pennsylvania.

What is Pennsylvania Inheritance Tax?

For the average Pennsylvania family, the Federal Estate Tax is not an issue when becoming a beneficiary of a loved one’s estate due to its high exclusion. In 2021, each U.S. citizen has an exemption of $11,700,000 against the Federal estate tax and the Federal gift tax.

But as far as the Pennsylvania Inheritance Tax, “it is imposed as a percentage of the value of a decedent’s estate transferred to beneficiaries by will, heirs by intestacy, and transferees by operation of law.”

The rates for inheritance tax in Pennsylvania as determined by the Department of Revenue are:

  • 0% on transfers to a surviving spouse or to a parent from a child aged 21 or younger;
  • 4.5% on transfers to direct descendants and lineal heirs;
  • 12% on transfers to siblings; and
  • 15% on transfers to other heirs, except charitable organizations, exempt institutions, and government entities exempt from tax.
  • Property owned jointly between spouses is exempt from inheritance tax.

Other inheritance tax exemptions include for those who have passed after June 30, 2012, some types of farmland and other agricultural property are exempt so long as the property is transferred to eligible recipients.

How long do I have to pay Pennsylvania Inheritance Taxes?

Pennsylvania inheritance tax payments are due upon the death of the descendent. If the payments are not made within nine months after the passing of the descendant, the payments become delinquent. However, if they are made within three months of the deceased passing, a 5% discount may be granted.

Can I avoid Inheritance Tax payments?

While you must meet with an estate planning and tax planning attorney to verify your rights, there are some cases where you can avoid or minimize inheritance tax payments to your potential beneficiaries and heirs.

These include:

  • 1. Create joint accounts with the beneficiaries before passing.
  • 2. Gift the assets.
  • 3. Get extra life insurance to adapt your assets.
  • 4. Get real estate outside of Pennsylvania–but be mindful of the other states’ tax laws.
  • 5. Pay the inheritance tax early.

Questions on PA Inheritance Tax Laws? Call MKPV Law.

You worked hard to acquire and build everything you value. But you also don’t want to burden your loved ones with inheritance taxes upon your passing. We can help you preserve your assets and your legacy while preserving your loved ones’ financial integrity. Call or contact us at (570) 348-0776 and schedule an appointment with Mazzoni Karam Petorak & Valvano. We can walk you through, step by step, all the legal options available to you.

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