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Frequently Asked Questions - Inheritance Tax

Frequently Asked Questions - Inheritance Tax

Q:  Are IRA's and 401K's taxable?
A:  They are fully taxable if the decedent was over the age of 59 1/2.

Q:  Are proceeds for survival action taxable?
A:  Proceeds for survival action are taxable.

Q:  Are proceeds from wrongful death or life insurance taxable?
A:  Proceeds from wrongful death, or life insurance are not taxable.

Q:  Can the funeral expenses and unpaid bills of the decedent be deducted from the amount subject to tax?
A:  Yes, unsatisfied liabilities incurred by the decedent prior to his/her death are deductible against his/her taxable estate.  In addition to debts incurred by the decedent or estate, the cost of the administration, attorney fees, fiduciary fees, funeral & burial expenses including the cost of a burial lot, tombstone or grave marker, and related burial expenses, are deductible.

Q:  Do I pay inheritance tax on my own money?  For the sake of convenience, I put my mother's name on my savings account.  Recently my mother died, and I am being told that I have to pay inheritance tax, is this correct?
A:  Under the inheritance tax law, the account was jointly owned because you and your mother had equal access to the account.  Therefore, in this example the survivor is taxed on one-half of the amount in the account.

Q:  Is there a discount allowed on PA inheritance tax?
A:  If inheritance tax is paid within 90 days of death, there is a 5% discount.  If inheritance tax is not paid by 9 months after date of death, there is interest added.

Q:  Where should the estates be probated?
A:  Estates are probated in the county in which the decedent resided at the time of death.

Q:  Who are considered lineal heirs and lineal descendants for the purpose of inheritance tax?
A:  Lineal heirs (grandparent-parent-child-grandchild-adopted child) 4 1/2%.

Q:  Who is entitled to claim the family exemption?
A:  The family exemption may be claimed by a spouse of a decedent who died as the resident of Pennsylvania.  If there is no spouse, or the spouse has forfeited his/her rights, then any child of the decedent who is a member of the same household as the decedent may claim the exemption.
In the event there is no spouse, or child, the exemption may be claimed by the parent or parents who are members of the same household as the decedent. The family exemption is allowable against assets which are passed on with or without a will. The amount of the family exemption is $3,500.00.