Take a sip of water before this one folks, it’s gonna be a little dry.
At 35 to 40 percent the Federal Estate Tax is steep, but if you have under $5.45 million in your estate you have no need to worry. That number gets doubled for a couple to $10.9 million and the surviving spouse can claim whatever is left of the other’s estate tax exemption for up to 9 months after death. Also that percent is only charged on assets above the exemption threshold.
The state in which the deceased person lived can also impose estate or, for PA, inheritance tax. You catch that? It’s where the assets were held that matters. Pennsylvania’s inheritance tax is the obligation of any heirs and is paid by the heirs, not the estate before distribution.
The rates are as follows:
Direct Descendent: 4.5%
Anyone Else: 15%
One thing we focus on a lot is having beneficiaries on your accounts. This allows the accounts to pass directly named beneficiaries and avoid probate. What this does not do is exempt them from being used to calculate the overall value of the estate. So though they may never see probate, you technically still have to pay inheritance tax on them unless they’re going to a spouse or charity.
And check out this sneaker of a rule: If you own a bank account jointly with a person in PA and they die, you have to pay inheritance tax on half of the account.
So there you have the basics and we hope nobody runs into this any time soon.
All the best,
Wesley R. Nicholson, Mike Allen and Aaron Everdyke
Securities Offered Through Commonwealth Financial Network, Member, FINRA, SIPC, a Registered Investment Advisor. Advisory Services offered through Laurel Financial Group are separate and unrelated to Commonwealth. Laurel Financial Group is a Registered Investment Advisor
Disclaimers: Please place all orders for purchase and or sale of any securities by personal phone call. We cannot accept securities orders by voicemail or by email. If you cannot reach the office, please call Commonwealth Financial Networks Trade Desk directly at 1-800-251-0080, option 1. This email, including attachments, is intended for the exclusive use of the addressee and may contain proprietary, confidential, or privileged information. If you are not the intended recipient, any dissemination, use, distribution, or copying is strictly prohibited. If you have received this email in error, please notify me via return email, permanently delete the original message, and destroy all copies. All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results