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What is inheritance tax?

On Behalf of | May 16, 2018 | Estate Administration And Planning |

When you plan your estate and have everything in order, you probably think that once you die, there are no worries. Unfortunately, that is not true. While you may have no worries, your loved ones could be hit with an inheritance tax. It is important to understand what this is and how it works, so you can plan your estate accordingly to avoid these taxes if possible. 

The Pennsylvania Department of Revenue explains inheritance tax is a percentage rate based on your heirs’ relationship to you that is charged on what they receive from your estate. Not every relative you leave something to will be charged this tax, which is something to keep in mind as you arrange your estate plans. If you leave everything to your spouse or your children who are under the age of 21, they will not pay anything. However, older children would pay a 4.5 percent tax. 

Other heirs will pay more. If you leave your brothers or sisters anything, then they pay 12 percent. Anyone else will pay 15 percent. One good thing is if you leave anything to charity, it is not taxed. Any taxes that must be paid are due in nine months. If your heirs pay the taxes early, within three months, then they may qualify for a discount of five percent. 

Taxes are generally applied to anything that you leave your heirs. Personal items that are not considered valuable in a monetary sense are not subject to the inheritance tax. This information is for education and is not legal advice.