States vary in what taxes they apply in relation to a person’s property upon his or her death. Some don’t have any such tax. Others have an estate tax, which is a tax on the estate as a whole. And then there are a small number of states that have an inheritance tax. This tax is on the individual inheritances distributed from the estate.
Pennsylvania falls into this last group. Today we’ll cover some common questions about the state’s inheritance tax
What inheritances does (and doesn’t) it apply to?
This tax applies to most distributions from a person’s estate upon their death. There are however, some exceptions. Among the distributions that generally don’t have any inheritance tax liability are those involving inheritances:
- To the deceased’s spouse
- To the deceased’s parents, if the deceased was 21 or under
- To charitable organizations, exempt government entities and exempt institutions
- Of certain farm and agricultural land to eligible recipients
How much is the tax?
The rate of the tax depends on who the inheritance is going to. Here are the levels for different groups of recipients:
- Lineal heirs and direct descendants (Such as children and grandchildren) – 4.5 percent
- Siblings – 12 percent
- Other heirs – 15 percent
Also, when the tax is paid can affect the overall amount. This is because a 5 percent discount is available for payments made within three months of the deceased’s passing.
What is the deadline for it?
Generally, the tax has to paid within nine months of a person’s death or it will be considered delinquent.
Taking the state’s inheritance tax laws into account can be very important when estate planning, as this can inform what kinds of strategies a person may want to take to reduce the overall inheritance taxes that will arise in relation to his or her property when he or she dies. Also, after a person’s death, it is important for his or her personal representative and family to follow the state’s rules related to these taxes, as missteps can cause problems.
Skilled Pennsylvania estate planning and administration lawyers can provide assistance and guidance regarding inheritance tax planning and probate matters related to this tax.