Many people here in Pennsylvania have taken steps to address their estate planning. These folks have drafted wills or created trusts that will ensure that their assets go to their assigned heirs or beneficiaries upon their death. But a surprising number of people haven’t done this, trusting the future of their loved ones to whatever the Pennsylvania legislature decides. When someone dies without a will, they are deemed to have died intestate, and their assets will be distributed according to Pennsylvania law. While you may save the money on a will and trust, you could be putting your heirs in a precarious position. This is why it is vital to consider using the services of an experienced estate planning attorney to address the future of your estate.
What are the Intestate Succession Laws?
When a person dies without a will, his or her assets will be distributed according to the Pennsylvania intestate succession laws. This involves locating relatives who may be able to inherit property under the law. A great deal depends upon the relationship of the person to the deceased.
The person who stands to inherit the most is the spouse. If the deceased person was married at the time of death, then he or she will most likely inherit the largest portion of the assets. This all depends on whether the deceased had children, and whether those were also the children of the spouse.
If the deceased had no children, then the surviving spouse inherits the entire estate, subject to taxes, expenses, and unpaid debts of the deceased. Where there are children and they are also the children of the spouse, then the spouse will receive the first $30,000 of the estate, with the spouse getting half of the remaining estate and the children splitting their half on a pro rata basis. However, when the children of the deceased weren’t also children of the spouse, the spouse will get half of the assets, and the children will share the other half pro rata. Interestingly, Pennsylvania law provides spousal rights for an elective share. If there is a will and the spouse would receive less than he or she would in intestacy, such spouse can elect to take one-third of the decedent’s property.
In situations where the decedent was unmarried at the time of death, the assets will pass first to the children. If there are no children, then the parents of the decedent will inherit the estate. Where there are no children and the parents predeceased the person, the assets will go first to any siblings and their children, such as nieces, nephews and grandchildren. If there are none of these, then the estate will pass to more distant relatives, like aunts and uncles, first, second and third cousins. In the unlikely event that there are no distant relatives, then the assets will escheat to the Commonwealth of Pennsylvania.
What are the Tax Rates on Inherited Property?
No matter how you inherit property, you may be subject to state inheritance taxes in Pennsylvania if you have received any money in an estate. The only property exempt from inheritance taxes is anything owned jointly between spouses. Otherwise, you will have to file an inheritance tax return within nine calendar months of the person’s death, regardless if you owe any taxes.
The tax rates depend upon your relationship with the deceased. If you are the decedent’s spouse, you will be taxed at a rate of 0%. This is the same rate if for a parent who inherits assets from a deceased child aged 21 or younger. Children, grandchildren and other lineal descendants pay taxes at a rate of 4.5% on the value of the assets transferred. Siblings are taxed at a rate of 12% on the transfers. All other heirs are subject to a 15% tax rate, except for assets that are transferred to charitable organizations and government entities that are tax exempt.
Pennsylvania recently enacted a law providing an exemption for the first $100,000 inherited by a person regardless of the relationship to the decedent. This is separate and apart from the federal inheritance tax threshold, so you may not have to pay federal taxes while still being taxed by Pennsylvania. In addition, new legislation has begun reducing the tax rates. For example, the sibling tax rate will be eliminated over a seven-year period while the non-sibling rate is being decreased by 0.5% annually. Until these become fully effective, Pennsylvania residents will continue to have to pay and file inheritance tax returns.
Contact a Pennsylvania Estate Planning Attorney Today
People who die without a will often put their heirs into a difficult position with intestacy. They also lose control over the distribution of assets upon their death, while potentially subjecting their heirs to costly state inheritance taxes. The experienced estate planning attorneys at Jones Gregg Creehan & Gerace can help you prepare for the future by drafting a will and establishing a trust that addresses the needs of your loved ones. Contact us today for a consultation so we can begin helping you address your estate planning needs.