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Bryn Mawr Pa Estate Inheritance Tax Lawyers – Taxation
A major area of misinformation and misunderstandings in the estate law and estate planning areas are the taxes that are imposed upon one’s death in Pennsylvania.
Very simply, two death taxes can be imposed on the death of Pennsylvania residents – the:
- Federal Estate Tax
- Pennsylvania Inheritance Tax
However, and unlike the income tax, which is very descriptive in its title as it is imposed upon your income, the phrases Estate Tax and Inheritance Tax are misnomers in that may tend to belie the actual fact that these are taxes imposed by virtue of your death.
Bryn Mawr Pa Estate Inheritance Tax Lawyers – Federal Estate Tax
Historically, the Federal Estate Tax has begun at a wealth threshold. If you possess less than the wealth threshold at your death, the federal estate tax will not be applicable.
If it is applicable, the tax is imposed on a percentage scale according to the amount of your wealth (i.e., potentially 47% of the value of your assets above the wealth threshold).
The current wealth threshold of the Federal Estate Tax has been changing drastically throughout the last decade. It has increased, disappeared, and reappeared in 2011.
In 2005, the threshold was $1,500,000.00; in 2006, 2007, and 2008, the threshold was $2,000,000.00; in 2009, the threshold was $3,500,000.00; and in 2010, the Federal Estate Tax was scheduled to be, and in fact was, eliminated.
However, and although the Federal Estate Tax was scheduled to return with a wealth threshold of just $1,000,000.00, in 2011, it did not. The Internal Revenue Service changed that law and “announced the 2015 estate and gift tax limits […] and the federal estate tax exemption rises to $5.43 million per person, and the annual gift exclusion amount stays at $14,000.” “IRS Announces 2015 Estate And Gift Tax Limits”
The federal estate tax exemption—that’s the amount an individual can leave to heirs without having to pay federal estate tax—will be $5.43 million in 2015, up from $5.34 million for 2014. That’s another $90,000 that can be passed on tax-free. The top federal estate tax rate is 40%.
Bryn Mawr Pa Estate Inheritance Tax Lawyers – PA Inheritance Tax
The Pennsylvania Inheritance Tax has no wealth threshold and starts immediately. It is imposed on a percentage based on the relationship of the beneficiary. Spouses and Charities are taxed at a 00.00% tax rate, lineal descendants are taxed at a 04.50% tax rate, brothers and sisters (but not brothers-in-law nor sisters-in-law) are taxed at a 12.00% tax rate, and everyone else is taxed at a 15.00% tax rate.
Be aware that Wills and Probate are extremely tax intensive.
It will begin with Estate Planning
It will continue with the Will’s vital tax clause
It will impact the client’s Asset Titles
It will extend through Probate
It will impact the beneficiaries tax obligations
It may resolve through the Estate Administration
It can extend far beyond the Estate’s conclusion
Extremely likely is the fact that the tax returns required in Pa are
The Pa Inheritance Tax Return
The Federal Estate Tax Return (depending)
The Decedent’s final Federal Income Tax Return
The Decedent’s final Pennsylvania Income Tax Return
The Estate’s Federal Fiduciary Income Tax Return(s)
The Estate’s Pennsylvania Income Tax Return(s)
The Philadelphia PA Inheritance tax 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 tax rate varies depending on the relationship of the heir to the decedent.
The Pennsylvania inheritance tax taxes assets owned by the decedent at the time of his or her death.
Unlike the federal estate tax, there is no minimum dollar amount for the estate to be taxed; all estates of any value are subject to taxation.
Bryn Mawr Pa Estate Inheritance Tax Lawyers – Rates
Inheritance tax 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 tax rate varies depending on the relationship of the heir to the decedent. The rates for Pennsylvania inheritance tax are as follows: The rates for Pennsylvania inheritance tax are as follows:
- 00.00 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger;
- 04.50 percent on transfers to direct descendants and lineal heirs;
- 12.00 percent on transfers to siblings; and
- 15.00 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax.
Bryn Mawr Pa Estate Inheritance Tax Lawyers – Due
Inheritance tax payments are due upon the death of the decedent and become delinquent nine months after the individual’s death. If it is paid within three (3) months of the decedent’s death, a 5 percent discount is granted to the Estate.
In Pennsylvania, the inheritance tax must be paid within nine months of the time of the decedent’s death. If it is not paid within that period of time, the Pennsylvania Department of Revenue may assess penalties and interest.
Bryn Mawr Pa Estate Inheritance Tax Lawyers – Help
Frequently, in our practice, we are confronted with many misconceptions concerning Pennsylvania inheritance tax. The Pennsylvania inheritance tax is a tax on property at the time of someone’s death and is imposed upon the transfer of that property. One common misconception is that spouses have to pay inheritance tax on property that they obtain from their deceased mate. Although that was the case in the past, it is not longer, having been abolished in 1994.
From the value of these resources, we are permitted to deduct certain expenses to arrive at a net valuation for the estate. These expenses include:
- the cost of the funeral,
- the debts of the decedent (including mortgage loans, credit cards, home equity loans, etc.),
- the expenses of the last illness,
- all fees that are paid to the Register of Wills Office; and
- the legal fees for processing the estate, and miscellaneous expenses and fees.
Once the net value has been calculated, the Pennsylvania inheritance tax is applied as follows:
- 04.50 % of that net value to children,
- 12.00 % passing siblings, and
- 15.00 % to other individuals would be taxed in Pennsylvania at a rate of 15%.
Many people do not realize that there are certain types of assets that are exempt from the Pa Inheritance Tax.
- As an example, life insurance proceeds which are paid directly to a beneficiary or are paid to the estate of the decedent are exempt.
- an IRA account held in the decedent’s name, if the decedent had not reached the age of 59 ½, is also exempt.
Sometimes, jointly held property is ignored for tax purposes at the time of death. For example, where a decedent owns a bank account which is titled in the decedent’s name and, let us say, two of his children’s names, the decedent’s one-third interest would be taxed at a rate of 4.5%.
However, if that account was established using only the decedent’s funds, and the decedent dies within one year, then the whole value of the account is taxed, not just a portion of it.
If payment is made within 90 days of the date of death, the department discounts the amount by 5%.
John B. Whalen, Jr., JD., LL.M., is an AV Peer Review Rated Preeminent 5.0 and Avvo Rated 10.0 Superb. He has obtained over 95 client reviews and peer endorsements premier and prestigious Attorney and Counselor at Law.
Mr. Whalen is featured on AV Peer Review Rated Preeminent 5.0, Avvo Rated 10.0 Superb, Avvo, Justia, Lawyers, Martindale, Nolo, Quora, and Thumbtack.
John is located at 118 Westdale Road, Upper Darby, Pa., 19082. He serves all surrounding counties, on all 7 days, from 9:00 AM to 10:00 PM. His office is open on all evenings, weekends, and holidays.
Mr. Whalen provides free initial consults all seven days, provides home visits, and provides flat fee structures. He can be reached by email at [email protected], and by telephone at 1-610-999-2157.
John has amassed over 60 prestigious and premier professional awards and over 5000 client reviews and endorsements. Mr. Whalen has achieved the AV Peer Review Rated Preeminent award from Martindale. He has received the AV Peer Judicial Preeminent award. He has received the Avvo Rated Superb 10.00 award, and the Avvo Rated Top Lawyer award. He has also received the Clients’ Choice Award, and the Top One Percent (1%) award.
He is the recipient of the Legum Magister Post-Doctorate Degree (LL.M.) in Taxation (from the Villanova University School of Law). He is the recipient of the American Jurisprudence Award in Wills, Trusts, and Estates (from the Widener University School of Law).
He is also the recipient of the ABA-BNA Law Award for Academic Excellence (from the Widener University School of Law).