The Commonwealth of Pennsylvania relies on the inheritance tax to collect a significant portion of its revenue. After every person’s death, their property must pass to designated heirs. Many of these heirs must then pay a portion of that property’s value as a tax to the Commonwealth.
There is often a significant level of confusion regarding the inheritance tax. The confusion often stems from whether you will need to make payments, how this differs from estate taxes, and the amount of payment that is necessary. A Cranberry Township inheritance tax lawyer is prepared to answer these questions and help you remain in the good graces of the Department of Revenue. Our probate attorneys could provide further information.
An inheritance tax aims to raise Commonwealth revenue by levying a tax on the property that people receive as a result of the probate process. Parties who receive this property must learn of the property’s fair market value (FMV) and provide a percentage of this value to the Department of Revenue. However, there is a 5 percent discount if it is paid within the first three months.
It is important to remember that this only applies to property that a person receives through probate. This means that effective estate planning could reduce this amount of property by transferring ownership through trusts or other creative means.
The key difference between an inheritance tax and an estate tax is timing. Parties who must pay an inheritance tax will do so after their receipt of the property in question. In Cranberry Township and elsewhere in Pennsylvania, people have nine months after an individual’s death to make these payments. However, an extension may be necessary if probate extends beyond this time limit.
By contrast, an estate tax applies to the full value of an estate prior to the distribution of any estate property. In addition, unlike the inheritance tax, there are no exemptions for inheriting children or spouses. Fortunately, there is no estate tax in the Commonwealth, although the federal estate tax may apply after the death of people with significant assets. Talking with a Cranberry Township inheritance tax attorney could help you better understand these key differences.
Commonwealth law shifts the burden of paying inheritance tax onto the heirs of an estate. Heirs and potential heirs must be able to recognize these potential liabilities. The Commonwealth’s Department of Revenue outlines the rates at which the Commonwealth demands these payments. The tax rates depend entirely upon the heir’s relationship to the decedent. These rates are as follows:
You should reach out to a Cranberry Township inheritance tax lawyer with any concerns you may have about your status under these categories, or for help estimating a future payment.
The inheritance tax forces many heirs to an estate to pay a portion of the value of their assets to the Commonwealth. It is vital that you be able to realize how this tax can impact your heirs and understand when you may need to make these vital payments.
You can reach out to our Cranberry Township inheritance tax lawyers anytime. We are prepared to explain the concept of an inheritance tax and how it affects an estate plan. We also work with heirs to assets to determine their tax liability and plan for proper payments to the Commonwealth of Pennsylvania. Give us a call today to discuss further.