Pennsylvania imposes an inheritance tax on all assets that pass to anyone besides a spouse. That includes children, grandchildren, parents, siblings, cousins, domestic partners, and more. The rates are as follows:
- Children/Grandchildren/Stepchildren: 4.5%
- Siblings: 12%
- All others (nieces, nephews, cousins, partners, friends, etc.): 15%
Pennsylvania does not offer a general exemption for inheritance tax. In other words, it starts from the first dollar.
Can you avoid Pennsylvania Inheritance Tax? My clients, who are typically located in Bucks County, Montgomery County, Philadelphia, Delaware County and Chester County, ask this question a lot.
Following are some options to consider reducing inheritance tax for your heirs. You should consult with the Law Offices of Jeremy A. Wechsler or another estate planning law firm before engaging in any inheritance tax reduction strategy.
- Use Life Insurance: Life insurance is generally exempt from PA Inheritance Tax. Your heirs will inherit a tax-free (income tax free, inheritance tax free, estate tax free) liquid asset.
- Lifetime Gifting: Making a gift during your lifetime reduces the inheritance tax on your estate. But you must be careful about gifting, as it can have several serious unintended consequences. Talk to a professional before gifting.
- Purchase Out of State Assets: Your vacation home in Florida is not subject to PA Inheritance Tax. In other words, property not situated in the state does not count for inheritance tax purposes.
For other ideas, contact our firm today at (215) 706-0200 to set up your complimentary consultation. We are happy to assist you with your inheritance tax and estate planning questions.