Pennsylvania Inheritance Tax

Thursday, November 29, 2018

Federal Estate Tax Update

In December 2017, the Tax Cut and Jobs Act of 2017 was passed by Congress and signed into law. The updated 2019 exemption amount for estate taxes and gift taxes is $11.4 million per person, or $22.8 million for a married couple. If you have more than this amount when you die, your estate is taxed at 40%.
Read more . . .

Tuesday, April 17, 2018

Let's Talk About Pennsylvania's Inheritance Tax

What is the PA Inheritance Tax?

It is a tax on property that you own within Pennsylvania at the time of your death. If you’re a resident of PA, most of your property, except for out-of-state real estate, will be subject to this tax. The tax is due by your estate in the nine months following your death.

Are there excluded assets?

Not really. Life insurance is the most prominent excluded asset, and farmland may be an excluded asset, but generally, most assets are included.
Read more . . .

Wednesday, April 5, 2017

Last Minute Tax News & Tips For 2017

The IRS is pretty sure it owns the month of April.  Well, at least April 18th (not April 15th this year).  In the spirit of the tax day quickly heading our way, I have put together some (hopefully) useful tax information for you to recap where we’re at in the new Trump era.


According to a Wall Street Journal article that you can

Read more . . .

Thursday, May 7, 2015

Term Life Insurance vs Whole Life Insurance

Term Life Insurance vs Whole Life Insurance - Why It Matters

Life insurance is a commonly used tool in estate planning, but often misunderstood or misapplied. It is one tool of many, and you should consider life insurance as part of a comprehensive plan.

Term life insurance is essential insurance that you rent for a period of time (typically 20 years). Term insurance is affordable if you’re young and healthy, and generally serves a specific purpose, such as premature death. You could instantly make up for income loss, supporting children, etc. Term insurance typically is used for younger people who need this affordable protection. The disadvantage of term insurance is that once your term expires, the insurance premiums skyrocket or the policy lapses. There is also no cash value or other benefits to these policies.

Whole life insurance is a policy that accumulates cash value and can offer a guaranteed death benefit. Certain types of whole life insurance policies can provide unique estate planning benefits, such as the ability to add an “accelerated death benefit” or long-term care rider. With this type of policy, life insurance is no longer just a benefit to your loved ones, but a benefit to you as well if you need long-term care (In Pennsylvania, nursing home costs are surpassing the $100,000/year mark easily). 

Life insurance generally passes inheritance tax free in Pennsylvania. Life insurance death benefits are also income tax free. Finally, you may use life insurance if you have a large estate to fund an Irrevocable Life Insurance Trust, so that the life insurance benefits aren’t included in the estate for tax purposes.

If you want to learn more about how life insurance may benefit you and your estate, contact The Law Offices of Jeremy A. Wechsler today for your consultation.

Wednesday, November 12, 2014

2014 Election & Estate Planning Law Changes

What Does The 2014 Election Mean For Your Estate Plan?

The saying goes, “elections have consequences” but poll after poll show Americans dissatisfied with the fact that government, no matter what party, can’t get anything done. Others argue that the beauty of our system is that the wheels are slow to turn. Whether government passes laws or not, there are still consequences of those actions and inactions. 

Turning to estate planning, the law is a fundamental component when sitting down to properly design a plan. Other key components are legacy planning, asset protection, family morals, values and goals. 

Now that the 2014 election has passed and voters have spoken, my prediction is that in the next two years, estate planning from a tax perspective will not fundamentally change. 

  • Federal Estate Taxes: The federal estate tax exemption is already $5 million (indexed for inflation) per person, so it only affects high net worth families. Republicans, now controlling Congress, have an established goal of eliminating the estate tax. However, the ‘death tax’ issue has been minimized because for most individuals, the tax is a non-issue. I predict no action happening on the federal estate tax or federal gift tax anytime soon. 

  • Stretch IRAs: There have been rumbles of discussion in Congress to eliminate the “Stretch IRA” and force beneficiaries to withdraw a Beneficiary IRA within 5 years. It’s a policy idea to generate short term tax revenue, but has never gotten out of a Congressional committee. My analysis: Congress and the President will be lucky if they can keep government open. I do not see broad tax reform on the table at this time.

  • Obamacare: Part of Obamacare includes a Net Investment Income Tax (NIIT). This is a 3.8% tax that effectively raises capital gains taxes for individuals and couples with more than a threshold amount of income. I cannot envision President Obama repealing Obamacare or any part of it during his final two years in office. This tax appears to be here to stay. For more information about the NIIT, see the IRS website NIIT page.
  • Pennsylvania Inheritance Tax: While I was following the Pennsylvania Gubernatorial election, there was no discussion of the PA Inheritance Tax that I recall. The majority of states have eliminated their inheritance tax, but Pennsylvania seems set on keeping the tax. Don’t expect our new Democratic Governor Tom Wolf to sign a repeal of the inheritance tax—-he’s been talking tax increases. Remember, life insurance remains inheritance tax-free.

The status quo, for the most part, is good news (save for the inheritance tax not being repealed). It gives you more opportunity to do non-tax planning like family legacy planning. Remember that tax planning is only one slice of the larger pie when it comes to estate planning.

It's time to get YOUR estate plan in order before the end of 2014. Call my office today at (215) 706-0200 to schedule your initial consultation. Together, we will design a plan that is customized to meet your needs.

Tuesday, August 26, 2014

Joint Accounts with Children = Poor Estate Plan

Three Reasons Joint Accounts May Be a Poor Estate Plan

By Jeremy A. Wechsler, Esq.
Your Estate Planning & Asset Protection Attorney

Many people see joint ownership of investments, bank accounts and real estate as an inexpensive way to avoid probate since joint property passes automatically to the joint owner upon death. Joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner falls ill or suffers from dementia. These are all legitimate benefits of joint ownership, but three potential drawbacks exist as well described below. Please note that I am discussing joint ownership with your children or other loved ones, excluding your spouse. Jointly owning property with a spouse is normal and makes complete sense. 

Drawbacks to Joint Accounts:

  1. Risk: Joint owners of accounts have complete, unconditional access and the ability to use the funds for their own purposes. I have seen children who are caring for their parents take money without first making sure the amount is accepted by all the children. In addition, joint assets are available in the case of divorce, creditor claims, bankruptcy, lawsuits and more. Joint assets could be considered as belonging to all joint owners if applying for public benefits or financial aid.

  2. Inequity. If you have one or more children on certain accounts, but not all children, at your death some children may end up inheriting more than the others. While you may expect that all of the children will share equally (“they will do the right thing”), it is far from a guarantee. If you have several children, you can maintain accounts with each, but you will have to constantly work to make sure the accounts are all at the same level, and there is little guarantee that this plan will actually work. This type of planning will only create discord and conflict in the family later on.

  3. The Unexpected. A plan based on joint accounts can truly fail if a child passes away before the parent. Then it may be necessary to seek guardianship to manage the funds or they may ultimately pass to the surviving siblings with nothing or only a small portion going to the deceased child's family. For example, a mother put her house in joint ownership with her son to avoid probate and Medicaid’s estate recovery claim. When the son died unexpectedly, the daughter-in-law was left high and dry despite having devoted the prior six years to caring for her husband's mother.

If you are concerned about incapacity, instead of joint accounts, consider using a power of attorney. It is much safer and does not give the appointed agent personal rights over your funds (unlike as a joint owner). The agent has a fiduciary responsibility to you and your beneficiaries.

Regarding probate and ease of administration, joint accounts are convenient but as described above, it presents risks. In Pennsylvania, probate is not a difficult or burdensome process. Also, property passing to children is taxed at a 4.5% inheritance tax rate, which is a relatively low rate compared to historical federal estate tax rates. With a well written will and trust, you can have peace of mind knowing your plan will work just the way you intend it to work, free of conflict and problems. Joint accounts may seem like an easy answer, but often create more headaches. Please review your estate plan to ensure that it will work as you intend for it to work. 


Tuesday, July 29, 2014

Same Sex Couples in Pennsylvania

Pennsylvania's DOMA law (Defense of Marriage Act), despite was struck down in May 2014 by a federal court in Whitewood v. Wolf. For same-sex couples, Pennsylvania now has marriage equality, which makes the state more welcoming to same-sex couples.

Whitewood v. Wolf has the following implications for same sex couples in Pennsylvania:

  • Same-sex couples in Pennsylvania can now get married in Pennsylvania. Pennsylvania does not recognize common law marriages.
  • Pennsylvania will now recognize an out-of-state marriage between two men or two women.
  • Same-sex marriages in Pennsylvania are now legal, which has significant implications for Pennsylvania Inheritance Tax purposes. In Pennsylvania, legally married couples pay 0% to transfer assets to each other upon death. Prior to Whitewood v. Wolf, same-sex couples, even if they were married, had to pay a 15% inheritance tax.

Pennsylvania is one of many states to have their DOMA law struck down in the last year. Governor Corbett has decided not to challenge this ruling, effectively making it law. The PA Legislature could always attempt to pass a new law, but the likelihood of this seems slight.

There are strategies that same-sex couples and same-sex families who reside in Pennsylvania can employ to create a better estate plan, taking advantage of all the tax savings available to you. For more information, contact my office today at (215) 706-0200. Jeremy A. Wechsler regularly assists same-sex couples in Pennsylvania, including Bucks County, Philadelphia and Montgomery County, and can help your family maximize tax planning strategies. 

Monday, July 28, 2014

Can you avoid PA Inheritance Tax?

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.

Wednesday, January 8, 2014

Probate vs Non Probate: What's the difference?

When planning your estate in Pennsylvania, it is important to understand the difference between probate and non-probate assets. Probate is the process through which a court determines how to distribute your property after you die. Some assets are distributed to heirs by the court (probate assets) and some assets bypass the court process and go directly to your beneficiaries (non-probate assets). 

The probate process in Pennsylvania includes filing a will and appointing an executor or administrator, collecting assets, paying bills, filing taxes, distributing property to heirs, and filing a final account. This can be a costly and time-consuming process, which is why some people try to avoid probate by having only non-probate assets.

Probate assets are any assets that are owned solely by the decedent. This can include the following:

  • Real property that is titled solely in the decedent's name or held as a tenant in common
  • Personal property, such as jewelry, furniture, and automobiles
  • Bank accounts that are solely in the decedent's name
  • An interest in a partnership, corporation, or limited liability company
  • Any life insurance policy or brokerage account that lists either the decedent or the estate as the beneficiary

Non-probate assets can include the following:

  • Property that is held in joint tenancy or as tenants by the entirety
  • Bank or brokerage accounts held in joint tenancy or with payable on death (POD) or transfer on death (TOD) beneficiaries
  • Property held in a trust
  • Life insurance or brokerage accounts that list someone other than the decedent as the beneficiary
  • Retirement accounts

When planning your estate, you need to take into account whether property is probate property or non-probate property. Your will does not control the distribution of non-probate property. Check the ownership of your property and your accounts to make sure jointly owned property will be distributed the way you want it to. It is also important to review your beneficiary designations.

Contact Jeremy A. Wechsler, Esq. to determine whether your property is being distributed the way that you want it to. Jeremy A. Wechsler assists families with probate and estate administration in Philadelphia, Bucks County, Montgomery County, Delaware County and Chester County. Our offices are located in Willow Grove, PA.

Monday, December 30, 2013

Common Excuses for Estate Planning Procrastination

Procrastination and estate planning is common, but nevertheless unfortunate. Without a proper estate plan, you risk family conflict, more burdens on your family at a delicate time, and ultimately less money for your loved ones. I have heard many excuses for failure to plan during my years of practice, and described a few of my ‘favorites’ below.

Excuse 1: My Estate Is Too Small

A common excuse I hear often from folks is that they do not have enough money to worry about planning their estate. However, this is an awful misconception about estate planning. Whether it be four figures or seven figures, the conflicts are the same. Sometimes, a $1,000 will create more conflict than $1 million! The amount does not matter. Without a solid plan, the possibility of conflict grows exponentially. In addition, regardless of your net worth, you need a plan for incapacity and long-term care. Everyone needs an estate plan.

Excuse 2: Indecision

If you are having trouble deciding whom your Executor and/or beneficiaries will be, you are in good company. However, I often see people continuously delay planning because they are ‘stuck’ on one decision. My best advice is, make the best decision you can make in the moment. You can modify your estate plan in the future. Also, having a plan on paper will give you a better perspective, and give you time to consider future changes. Life is not static, and just as we are continually faced with new circumstances, your estate plan must reflect those changes.

Excuse 3: General Delay / Too Many Other Things To Do

Our 24/7 society where we are all juggling too many things makes it challenging to set aside time for estate planning. Unfortunately, I have seen too often people who have failed to plan, only to be suddenly faced with unfortunate circumstances. None of us have a crystal ball, and we have to be ready for the curveballs. Now is the moment to invest some time to begin your estate plan or review an existing plan.

Excuse 4: It Costs Too Much

A well-crafted estate plan is an investment for you and your loved ones. It can save on unnecessary government fees and taxes, as well as additional attorney fees later on. An estate plan may expose planning opportunities for your family to preserve assets in case of entrance into a nursing home, among other opportunities. Seek a qualified attorney that you feel confident will recommend a pragmatic plan for you. Avoid searching for the cheapest solution (i.e., a ‘simple will’). A will is just the tip of the iceberg. I analogize an estate plan to a car. A will is a single part of a plan, like a steering wheel. A car will not work with a steering wheel alone. Seek common sense solutions that fit your needs; that may include a trust or other tools. A good attorney will explain why he or she is recommending those items and explain the costs involved.

Conclusion: Make a resolution to start your estate plan in 2014, or if you have an estate plan, take some time to review it this year. Try to avoid these common excuses (and many others) that deter proper planning.

For a review of your current plan or if you are without a plan, please call my office at (215) 706-0200 to schedule your consultation today. 

Friday, December 27, 2013

Pennsylvania Probate

If you have recently lost a loved one in Pennsylvania, you may be faced with the Pennsylvania probate process. In Philadelphia, Bucks County, Montgomery County and Delaware County (areas where we practice), probate generally works the same.

Probate is the process of the county Register of Wills appointing an Executor or Administrator. Whether or not an individual has a will, probate is still typically required.

Sometimes, probate can be handled without attorney assistance in Pennsylvania. However, many Executors or Administrators decide to hire a probate attorney to assist them with ensuring accounting is done properly, creditor issues are dealt with, inheritance taxes and estate taxes are filed properly, etc. Also, an attorney is needed if there are family conflicts, will challenges or estate contests.

You may feel overwhelmed when you realize you have to probate a will and settle an estate. If you need assistance, please call our office at (215) 706-0200. The Law Offices of Jeremy A. Wechsler regularly helps clients navigate the probate and estate administration process in Philadelphia, Bucks County, Montgomery County, Delaware County and other areas in Pennsylvania.

The key to successful probate in Pennsylvania is competent representation to ensure the Executor or Administrator does not face personal liability. Please call us today at (215) 706-0200 to schedule your initial telephone consultation to determine if we can assist you.

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The Law Offices of Jeremy A. Wechsler assist clients with Estate Planning matters in Willow Grove, PA as well as Abington, Hatboro, Dresher, Horsham, Bryn Athyn, Huntingdon Valley, Fort Washington, Jenkintown, Glenside, Oreland, Warminister, Wyncote, Ambler, Elkins Park, Flourtown, Philadelphia, Warrington, Cheltenham, Gwynedd Valley, Jamison, Feasterville Trevose, Richboro, North Wales, Blue Bell, Lafayette Hill, King of Prussia, Collegeville, Oaks, Phoenixville, Oxford Valley, Langhorne, Penndel, Bristol, Fairless Hills, Bensalem, Plymouth Meeting, Furlong, Philadelphia County, Bucks County and Montgomery County.

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