Do I really need to pay PA inheritance tax?

It depends. Pennsylvania inheritance tax is due on certain assets held by a Decedent at the time of death and is based on the relationship between the Decedent and the beneficiary.

Which assets are subject to inheritance tax?

  • Cash

  • Real estate

  • Automobiles

  • Personal effects such as furniture, antiques, jewelry, etc.

  • Stocks

  • Bonds

  • Bank accounts

  • Closely-held business interests, rents, etc.

  • Joint-owned property (except between spouses), including jointly-held convenience accounts

  • Retirement and investment accounts, including those passing directly to beneficiaries (except when an IRA owner is under 59 1/2 at the time of death)

  • Gifts made within 1 year of the Decedent's death (less a $3,000.00 exemption per person)

  • Assets held in a Living Trust (depending on the specific trust)

Which assets are exempt from PA inheritance tax?

  • Property held between spouses

  • Life insurance proceeds (regardless of whether paid to Estate or beneficiaries)

  • Certain farm land and other agricultural property

What are the tax rates?

As stated above, the tax rates are determined based on the relationship between the Decedent and the beneficiary. Charitable organizations and certain institutions are fully exempt from the tax.

Spouse - 0%

Lineal Descendant* (Child, Grandchild, Step-children/grandchildren, and Parents) - 4.5%

Siblings - 12.5%

All other relationships (i.e. niece/nephew, aunt/uncle, friend, neighbor, boyfriend/girlfriend, etc.) - 15%

*Transfers to a parent from a child aged 21 or younger and transfers from a parent to a child aged 21 or younger are currently taxed at 0%.

Before paying inheritance tax, it is best to consult with your estate attorney and accountant.