When dealing with probate and estate administration, be aware that Pennsylvania imposes inheritance taxes on the decedent’s assets. The tax rate is determined by the relationship of the decedent to the person inheriting the property (the beneficiary). The tax rate for spouses is 0%, while lineal descendants, like children, pay 4.5%. Siblings pay a 12% tax, and the tax rate for anyone else is 15%. It does not matter where the beneficiary lives, only that the decedent was a Pennsylvania resident at the time of death.
What property is subject to inheritance taxes? All property in a decedent’s estate, along with any property that is worth over $3,000 which had been transferred by the decedent within one year of his or her death, is subject to Pennsylvania inheritance taxes. If the property was held jointly by the decedent and another person with a right of survivorship, the property is only taxed as to that percentage that was considered to be held by the decedent at the time of his or her death (i.e., 50% if two joint owners, 33 1/3 % if three joint owners).
Certain property is not subject to inheritance taxes, such as property that was held jointly by a husband and wife when the first spouse dies or property that was left by the decedent to charity. Life insurance proceeds are not subject to inheritances taxes, whether left to an individual or to the estate.
It is important to consider Pennsylvania inheritance taxes as part of the probate and estate administration process and to discuss these matters with an experienced elder law attorney.