Q: Will my estate be subject to death taxes?
There are two types of death taxes to be concerned about. The federal estate tax is computed as a percentage of your net estate and currently applies to estates with net assets of $5.3 million or greater. The taxable estate includes life insurance. If your assets approach that amount, especially taking into account the growth rate of your assets, it is vital that you consult with an estate planning attorney.
Pennsylvania inheritance tax is owed on everything you own at your death with the exception of life insurance. Deductions are available, such as funeral expenses, attorney’s fee, executor’s commission, costs of administration, and debts of the decedent. The net is taxed at a zero rate for spouses, 4.5% for lineal descendants (children and grandchildren), 12% for siblings, and 15% for everyone else. The inheritance tax must be paid before distribution to beneficiaries. The inheritance tax is due within nine months of the date of death. Pennsylvania gives a 5% discount for tax paid within the first three months.