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Pennsylvania inheritance tax vs. estate tax

Estate planning is critical for anyone who has Pennsylvania assets, from banking and retirement accounts to cars, jewelry and other tangible items. If you do not have a will, the state divides the assets, which may not be according to your wishes. At Bononi & Company, P.C., our team of experienced attorneys often assists clients in opening an estate and other legal issues.

Smart Asset reports that regardless of your estate’s size, it owes nothing to the state as Pennsylvania is one of 38 states with no estate tax. However, there is an inheritance tax that heirs must pay once you have passed on. The percentage owed depends on the relationship between you and your beneficiaries.

Your estate automatically transfers to your spouse and any children under the age of 21, so no tax applies. However, if you leave any assets to other family members, taxes apply as follows:

  • For direct descendants and lineal heirs, such as grandchildren, the tax is 4.5 percent
  • Transfers to siblings result in a 12 percent tax
  • Other beneficiaries, except exempt institutions and charitable organizations, pay 15 percent tax

Creating an estate plan takes time and requires an understanding of everything in your portfolios. If you began estate planning when you were young, modifications might be necessary, especially if you have divorced. Depending on the size of your estate, you may prefer to gift a portion of the assets before you die. Trusts and other financial tools may benefit your heirs, based on individual circumstances and the assets involved. Visit our webpage for more information on this topic.

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