Pennsylvania Guarantees Taxes in Life and in Death

Benjamin Franklin once said, “Our new Constitution is now established, everything seems to promise it will be durable; but, in this world, nothing is certain except death and taxes.”

The Commonwealth of Pennsylvania Department of Revenue (DOR) ensures that Benjamin Franklin’s old adage continues to ring true. On the date of your death, the DOR starts a nine-month timer for your Estate to prepare and file an inheritance tax return. If your Personal Representative can gather the necessary information to complete this task within three-months, then the DOR will grant your Estate a five percent (5%) discount on the inheritance tax due. But if the Personal Representative fails to beat the nine-month clock, then the DOR will impose interest and penalties. Therefore, it is crucial to maintain your financial affairs so that your Estate is not unnecessarily burdened with additional tax burdens.

Although some states allow you to file for a waiver depending upon the classification of beneficiaries under your Last Will and Testament, Pennsylvania requires your Personal Representative to prepare and file an inheritance tax return even though no tax is due. Ultimately, you want to be prepared both for your own passing but also in the event you are tasked as the Personal Representative of an Estate.

One more consideration is how your inheritance tax payments will be made to the DOR. In other words, whose funds are responsible for the costs of preparing, filing, and payment of inheritance taxes. Typically, a Last Will and Testament contains a provision that directs the Estate to incur these costs. However, that is not always the case, and there are instances where the costs may be passed on to other people less prepared to shoulder the burden of remitting such a substantial payment. The latter is likely to cause unnecessary stress and strain on those attempting to grieve the loss of a loved one.

It is crucial to be prepared for the obligation of filing and preparing Pennsylvania’s inheritance taxes whether you are the decedent or the Personal Representative. Contact me to discuss how we can prepare and execute a strategy for Pennsylvania Inheritance Taxes.