INHERITANCE TAX QUESTIONS
This information has been issued to inform and not to advise. It is based on Pennsylvania Law. The statements are general, and individual facts to a given case may alter their application or involve other laws not referred to here.
ARE TAXES PAYABLE ON AN ESTATE?
Effective for dates of death after July 1, 2000 Pennsylvania Inheritance Tax rate is 4.5% for direct descendants (lineal heirs, grandfather, grandmother, father, mother, children) and a rate of 12% for transfers to a sibling (an individual who has at least one parent in common with the decedent, whether by blood or adoption). Property owned jointly between husband and wife is exempt from Inheritance Tax, while property inherited from a spouse is taxed at a rate of 0%. The prior collateral beneficiaries "all others" (nephews, nieces, aunts, uncles, cousins, friends, etc.) tax rate of 15% remains (except charitable organizations, exempt institutions, and government entities which are exempt from tax). A transfer from a child twenty-one (21) years of age or younger to a natural parent, adopted parent, or stepparent is taxed at the zero rate. A discount of 5% of tax due is allowed for whatever portion of the tax is paid within three (3) months.
Within nine (9) months of date of death, the Inheritance Tax return is due. Interest is charged beginning with first day of delinquency, or nine (9) months and one (1) day from the date of death, to the date of payment. Application of extension of time for filing the return may be requested.
The Register of Wills serves as an agent for the Commonwealth in the Collection of the tax. The return is filed with the register who granted the letters. The Inheritance Tax check is made payable to "Register of Wills, Agent."
WHAT PROPERTY IS SUBJECT TO INHERITANCE TAX?
All real property and all tangible personal property, including but not limited to cash, automobiles, furniture, antiques, jewelry, etc., located in Pennsylvania are taxable. All intangible property including stocks, bonds, bank accounts, loan receivable, etc. is taxable regardless of where it is located. Jointly owned property, except between husband and wife, including but not limited to real estate, securities, bank accounts, etc., with the right of survivorship, is taxable.
CAN THE FUNERAL EXPENSES AND UNPAID BILLS OF THE DECEDENT BE DEDUCTED FROM THE AMOUNT SUBJECT TO TAX?
Yes. Unsatisfied liabilities incurred by the decedent prior to his/her death are deductible against his/her taxable estate. In addition to debts incurred by the decedent or the estate, the cost of administration, attorney fees, fiduciary fees, funeral and burial expenses including the cost of a burial lot, tombstone or grave marker, and other related burial expenses, are deductible.
FOR THE SAKE OF CONVENIENCE, I PUT MY MOTHER'S NAME ON MY SAVINGS ACCOUNT. RECENTLY MY MOTHER DIED AND NOW I AM BEING TOLD THAT I WILL HAVE TO PAY AN INHERITANCE TAX ON MY OWN MONEY, CAN THIS BE CORRECT?
Under the Inheritance Tax Law, the account was jointly owned because you and your mother had equal access to the account. Therefore, in this example the survivor is taxed on one-half of the amount in the account.
WHAT IS THE FAMILY EXEMPTION AND HOW MUCH CAN BE CLAIMED?
The family exemption is a right given to specific individuals to retain or claim (certain types of decedent’s property) in accordance with Section 3121 of the Probate, Estate and Fiduciaries Code. For decedents dying after January 31, 1995, the family exemption is $3,500. From June 27, 1974, through January 31, 1995, the amount of the family exemption was $2,000.
WHO IS ENTITLED TO CLAIM THE FAMILY EXEMPTION?
The family exemption may be claimed by a spouse of a decedent who died as a resident of Pennsylvania. If there is no spouse, or if the spouse has forfeited his/her rights, then any child of the decedent who is a member of the same household as the decedent may claim the exemption.
In the event there is no spouse or child, the exemption may be claimed by a parent or parents who are members of the same household of the decedent. The family exemption is allowable against assets which are passed on with or without a will.
WHERE IS THE INHERITANCE TAX RETURN TO BE FILED?
The Inheritance Tax return is to be filed in duplicate with the county where the decedent was a resident. There is a filing fee of $10.00, payable to Register of Wills-York County (insolvent estates - filing fee is waived). In York County mail Inheritance Tax returns to:
Bradley C. Jacobs
Register of Wills, York County
York County Judicial Center
45 North George Street
York, PA 17401
SAFE DEPOSIT BOXES
WHO MAY ENTER A SAFE DEPOSIT BOX AFTER THE DEATH OF A DECEDENT? (Link to Form)
No one is allowed to enter a safe deposit box-not even a joint owner-except to remove a will and/or burial instructions in the presence of a bank employee. The bank employee must complete PA Form REV-487 (Entry into a Safe Deposit Box to remove a Will or Cemetery Deed) to record the entry and mail it to the PA Department of Revenue. PA law states that the contents of safe deposit boxes must be inventoried before they can be removed.
DO SAFE DEPOSIT BOXES HAVE TO BE INVENTORIED BY THE STATE AFTER SOMEONE PASSES AWAY AND WHO MUST BE PRESENT?
Effective May 11, 2011, neither a department or bank employee, nor lawyer or CPA must be present at a safe deposit box inventory. Instead, pursuant to the Inheritance and Estate Tax Act of 1991 ("Act"), a safe deposit box of a decedent may be entered at the time fixed in a notice mailed within seven days of the date of proposed entry, to the Department of Revenue and to the financial institution in which the box is located, 72 P.S. § 9193. The department no longer will provide employees to be present at safe deposit box inventories.
HOW DO I ARRANGE AN INVENTORY OF A SAFE DEPOSIT BOX? (Link to Form)
The Act requires that notice of a proposed safe deposit box entry and inventory must be delivered to the department via United States Postal Service with return receipt service. The Act allows that, when a person furnishes a signed statement under penalty of perjury that he or someone in his behalf has given this notice, the financial institution in which a safe deposit box of a decedent is located shall permit entry into the box and removal of its contents, without the presence of a department or bank employee.
(1) The notice must include:
a. the name of estate and person entering the box,
b. the name and street address of the financial institution in which the box is located, and
c. the date and time of entry.
(2) The Notice must be:
a. delivered via United States Postal Service, return receipt service
b. copied to the financial institution in which the box is located
c. sent at least seven days in advance to:
PA Dept of Revenue
Safe Deposit Box Unit
P. O. Box 280601
Harrisburg, PA 17128-0601
(3) At the time of entry, the estate representative must also provide a statement to the financial institution attesting that the notice was sent to the department, with the following or similar language:
"Under penalties of perjury I swear that I gave notice
required under Section 2193 of the Inheritance and
Estate Tax Act, 72 PS § 9193, to the Pennsylvania
Department of Revenue, via United States Postal
Service, of my intention to enter this safe deposit box
on today’s date".
(4) Within 20 days of the entry, the estate representative must also return a completed Safe Deposit Box Inventory form REV-485 to the department’s Safe Deposit Box Unit.
**The information listed above is intended to be of assistance by providing basic information relating to Pennsylvania Inheritance Tax. All questions regarding your Inheritance Tax Return should be directed to the PA Department of Revenue. The Register of Wills Office is a filing office for your Tax return and can not give advice or assistance in completing your return.
Inheritance Tax Division
PA Department of Revenue
Bureau of Individual Taxes
Harrisburg, PA 17128-0601
Office (717) 787-8327
Fax (717) 772-0412