PA Inheritance Tax Rates

Pennsylvania Inheritance Tax Rates – 2019

Pennsylvania imposes an inheritance tax on a decedent’s taxable estate.  The tax applies to every dollar of the estate in excess of expenses and debts.  There is no exemption nor is there an exclusion under which no tax will apply.  The tax rate is dependent upon the relationship between the decedent and the beneficiary.

According to Pennsylvania Department of Revenue, 2019 Tax rates on individually owned assets passing to beneficiaries at the death of a PA resident are as follows:

  1. A decedent’s spouse: 0.0%
    1. A decedent’s children or grandchildren: 4.5%
    1. A decedent’s siblings: 12%
    1. A decedent’s nieces, nephews & friends: 15%
    1. A decedent’s Parents: 4.5%
    1. Charities: 0.0%

Lifetime Gifts:  There is no Pennsylvania gift tax.  However, all gifts made during the 12 months preceding the decedent’s date of death are brought back in and are taxable in the estate for PA Inheritance Tax purposes.  There is a $3,000 exclusion for gifts made during each calendar year of the 12 months prior to the date of death.  For example, if Sally dies on May 1, 2019 and she made a gift of $103,000 to her son on December 30, 2018 and another $3,000 on January 1, 2019, only $100,000 will be brought back into Sally’s estate for PA inheritance tax purposes.  The $3,000 exclusion applies to both the 2018 and the 2019 gifts made during the 12 months prior to Sally’s date of death.

Jointly Owned Assets:  Pennsylvania imposes inheritance tax on the decedent’s percentage ownership interest of jointly-owned assets.  For example, if Sally died owning a $100,000 account jointly with her son, $50,000 of that account would be subject to a 4.5% tax.  If Sally died owning a $100,000 account jointly with her son and daughter, $33,333 of that account would be subject to a 4.5% tax.

In Trust For Or Beneficiary Accounts:  Pennsylvania imposes inheritance tax on the entire value of accounts a decedent owned in his or her name alone and on which he or she designated beneficiaries.

Assets Owned In a Revocable Trust:  Generally, if someone dies owning assets in a revocable trust over which he or she had access and control those assets, those assets will be 100% taxable for Pennsylvania inheritance tax purposes.

Assets Owned In An Irrevocable Trust:  Irrevocable Trusts are taxed in a complex way and you should consult counsel when determining if assets in an irrevocable trust are PA Inheritance taxable.  Depending on how an irrevocable trust is written, the trust assets could either be inheritance taxable or not, subject to the reservations of powers in it when created.

Life Insurance:  Pennsylvania does not  apply inheritance tax to the proceeds from life insurance on a decedent’s life.