Whether assets are inherited under Wills or by intestacy (without Wills), when someone passes away in Pennsylvania, there may be inheritance taxes due to the Commonwealth. The amount, if any, that is due depends on the value of the decedent’s assets on the date of death as well as who receives the assets. There are four basic rates: 0% between spouses, 4.5% for lineal descendants (children, grandchildren, parents, etc.); 12% for siblings (brothers or sisters) and 15% for anyone else.
For example, if Mrs. Johnson passes away and owns everything jointly with her husband, Mr. Johnson will inherit all of the assets but does not have to pay inheritance tax or file a tax return since his rate is 0%. However, if Mr. Johnson then passes away and leaves everything to his children, they will have to pay a 4.5% inheritance tax on the net assets (total assets reduced by debts and the expenses of administering his estate). Inheritance taxes and the tax return are due 9 months after death but if the taxes are paid within 90 days of the date of death (a “discount period”), there is a 5% discount on the amount of taxes owed. So, if the children owed $10,000 in taxes, they could save $500 by making the tax payment within 90 days of the date of death. Planning with an elder law attorney may help to reduce inheritance taxes, especially if the tax rate is 12% or 15%.