No estate will have to pay taxes on Pennsylvania estate. There is still a federal estate tax. Pennsylvania is one of the few states that collects an inheritance tax. If you are a resident of Pennsylvania, or if you own real property or tangible property located in Pennsylvania, people who inherit your property may have to pay tax on the amount they inherit.
Whether they will have to pay the tax and how much they will have to pay, depends on how closely they are related to you: the closer the family connection, the lower the tax rate. Pennsylvania inheritance tax is technically a tax on the payee's right to receive his or her property. The amount of tax a payee pays depends on the value of the property they receive and their relationship to you. Traditionally, Pennsylvania inheritance tax had two tax rates.
A six percent rate was applied to assets that passed to so-called linear descendants, such as children, grandchildren and stepchildren. A rate of 15% was applied to so-called collateral beneficiaries. This included brothers, sisters, nieces and nephews and everyone else. Transfers to charities were tax-free, as were assets owned by spouses with survivors' rights.
These two rates were the law until 1995, when a third rate was introduced. That third rate is a zero percent rate that applies to assets left to a spouse. This spousal exemption is discussed in another article. Unlike most states, Pennsylvania inheritance tax rates are not the same for all beneficiaries.
The fee you will pay depends on your relationship with the person who died. The PA inheritance tax rate is 0% for property transferred to a surviving spouse or child under the age of 21.Giving is especially beneficial when the beneficiaries of the property will be siblings (subject to a 12% PA inheritance tax rate) or those who fall into the “other category” (subject to a 15% PA inheritance tax rate). The tax is triggered when a person who owned or controlled an asset dies and the asset passes to another person, usually called the beneficiary. In addition, the other state may have its own state estate or estate taxes that may be higher than the PA rates.
A good understanding of estate and estate tax returns by the probate lawyer will reduce the total cost of the estate. If inheritance tax is paid within three months of the decedent's death, a 5 percent discount is allowed. Any person or organization that inherits property falls into a category for Pennsylvania inheritance tax purposes. For detailed and historical information about Pennsylvania inheritance tax, see the Tax Compendium.
If you pay Pennsylvania estate tax within 3 months of the date of death, you are entitled to a 5% discount. Agricultural land is exempt from inheritance tax, provided that the land is inherited by family members and continues to be used for agriculture for seven years. As an update, Pennsylvania has an inheritance tax on most assets that are transferred at the time of your death if they are going to anyone other than a spouse or charity. Buying life insurance for the primary purpose of avoiding PA inheritance tax may not be in your best interest.
Pennsylvania inheritance tax is a transfer tax on the transfer of assets from the deceased from Pennsylvania (or someone with real estate in Pennsylvania) to the new owner. However, siblings who are related by blood (including step-siblings and sisters) or by adoption pay a markedly higher tax rate of 12%. .