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Estate Planning & Pennsylvania Inheritance Tax

On Behalf of | Oct 25, 2013 | Estate Planning

Estate Planning & Pennsylvania Inheritance Tax would have applied had the late actor, James Gandolfini, died in PA.  

“There’s an old Italian saying: F— up once, lose two teeth”

In an earlier post, we discussed how James Gandolfini (a/k/a “Tony Soprano”) had an estate plan that could stick his beneficiaries with a $30 million tax bill payable to the Federal government.  Gandolfini’s will was offered for probate in New York, so in addition to Federal taxes, his estate will be subjected to state taxes as well. Screw up one estate plan, get stuck with two big tax bills – one for the IRS and one for New York State.

If Gandolfini died as a Pennsylvania resident, or if he owned property in Pennsylvania at the time of his death, he would have been subject to Pennsylvania Inheritance Tax. Unlike the Federal estate tax, Pennsylvania levies taxes on all estates, no matter how big or small they are. The tax will be calculated based on the decedent’s gross estate, i.e.: all of the property owned and passed on at the time of their death. From that amount, certain deductions can be taken, for example, funeral expenses, estate administration fees and charitable donations, can all be deducted from that gross amount. After subtracting all deductions, inheritance tax will be assessed on all the remaining property.

Gandolfini’s estate plan left money to his spouse, his children, his sisters and some choice close friends who were not blood related. How does this play out in Pennsylvania? Each of these types of beneficiaries are taxed at a different rate under Pennsylvania law. As of 2013, Pennsylvania inheritance tax rates are as follows:

Property left to your spouse – 0%

Property left to your children, grandchildren and other lineal descendants – 4.5%

Property left to your siblings – 12%

Property left to anyone else (friends, co-workers, neighbors) – 15%

The amount given to each type of beneficiary will be subject to the appropriate percentage of tax. In Pennsylvania, with these tax rates, it is easy to see how an estate can rack up a very large tax bill very quickly if the decedent did not have a lawyer plan properly.

Pennsylvania Inheritance Tax affects all Pennsylvanians. To discuss how these taxes will affect you and your estate, and to develop a plan for you, call our office at 724-940-0100 to speak with a Pennsylvania estate planning attorney today.