Inheritance tax

[Refresher]

Quote:

Originally Posted by EastWest Gal Was the tax paid from the estate before the assets were transferred? My DF passed in PA in 2009. I contacted his lawyer within a couple of days (small town lawyer, great guy). We went to the county clerk's office and obtained multiple copies of his death certificate, registered his will and got official copies from the recorder as well. Then I went to the bank and opened an estate checking account and moved the money from his checking account there. Out of that account, I paid the inheritance tax. I didn't even know about the state inheritance tax before he passed. It's supposed to be paid before the estate is distributed. If paid within 90 days there is 10% discount. The inheritance tax is 0% for spouse, 4.5% for offspring, 12% for siblings, 15% for others. It sounds like the transfers were made very quickly, before the tax was paid. It also seems that savings bonds complicate matters. Sent from my iPhone using Early Retirement Forum

4.5% for kids? Wow

[RE2Boys]

Quote:

Originally Posted by Refresher 4.5% for kids? Wow

Should read "direct lineal descendents"

That would include adult children and grandchildren of deceased person.

I tell folks, unless extremely wealthy, to forget about federal "death" taxes but to watch out for PA Inheritance Tax.

[Refresher]

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Originally Posted by RE2Boys I tell folks, unless extremely wealthy, to forget about federal "death" taxes but to watch out for PA Inheritance Tax.

Any preventative advice offered to them?

[REWahoo]

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Originally Posted by Refresher Any preventative advice offered to them?

Postpone your death as long as possible.

[Taxman59]

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Originally Posted by Refresher Any preventative advice offered to them?

Use protection when you are young!

[meierlde]

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Originally Posted by Refresher Any preventative advice offered to them?

What about move to a state that does not have the such taxes?

[Sunset]

PA should offer low cost nursing home care to get more folks to go there in their final years, then slam them with the inheritance taxes.

[Refresher]

Quote:

Originally Posted by Sunset PA should offer low cost nursing home care to get more folks to go there in their final years, then slam them with the inheritance taxes.

Maybe on the interest only, this says no inheritance on principle

Inheritance Tax

The value of your savings bonds – the principal of the investment – passes to you tax-free. Interest earned by the bonds is another matter entirely, however. Depending on where you live, the interest might incur an inheritance tax. The federal government doesn't impose such a tax, but seven states do: New Jersey, Nebraska, Maryland, Pennsylvania, Kentucky, Iowa and Indiana. In these jurisdictions, the interest – but only the interest – is subject to inheritance tax, a levy on individual bequests to certain beneficiaries.

[Dash man]

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Originally Posted by Refresher Any preventative advice offered to them?

This is one reason we will be Florida residents by the end of this year.


Enjoying life!

[smurray5991]

In our case, the bonds were in a Living Trust, and had already matured, so were redeemed shortly after the decedent's death. But proceeds still remain in the estate account, as distribution to heirs has not occurred, and can't occur until the estate/inheritance taxes have been paid in NJ (we are below the federal threshold, so no tax there).
If I understand what our estate attorney has told us, the full value of the bonds will be included in the calculation of the entire DoD estate value for estate tax purposes (of course minus all expense deductions for the estate), and that tax will be paid by the estate prior to asset distribution to heirs. The accrued interest from these bonds will also not be paid by the beneficiaries as part of our income tax. Redemption occurred prior to distribution to heirs, and under the estate/successor trust's assigned tax id, and interest was fully earned prior to date of death. Our understanding is that federal and state tax on that savings bond interest will therefore be paid as part of the decedent's final income tax returns so the beneficiaries would not see any tax consequences there either.
I guess we'll see what actually happens when everything is finally filed!

[RE2Boys]

Quote:

Originally Posted by smurray5991 Our understanding is that federal and state tax on that savings bond interest will therefore be paid as part of the decedent's final income tax returns so the beneficiaries would not see any tax consequences there either. I guess we'll see what actually happens when everything is finally filed!

The bonds do not need to be fully matured for the accrued interest to be paid on the final return of the deceased. It's an option that the personal rep can choose in preparing the deceased final return.

[Refresher]

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Originally Posted by RE2Boys The bonds do not need to be fully matured for the accrued interest to be paid on the final return of the deceased. It's an option that the personal rep can choose in preparing the deceased final return.

That would seem wise since the interest is subject to inheritance tax although the info I am getting is the. Principle is not subject to state inheritance taxes at all.

[RE2Boys]

Quote:

Originally Posted by Refresher That would seem wise since the interest is subject to inheritance tax although the info I am getting is the. Principle is not subject to state inheritance taxes at all.

For PA regarding savings bonds and inheritance tax, see:
http://www.revenue.pa.gov/FormsandPu...-1503_inst.pdf

[Winemaker]

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Originally Posted by Sunset PA should offer low cost nursing home care to get more folks to go there in their final years, then slam them with the inheritance taxes.

CURRENTLY, PA does not tax pensions, 401k, and tIRA distributions as income.

[Dash man]

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Originally Posted by Winemaker CURRENTLY, PA does not tax pensions, 401k, and tIRA distributions as income.

Not for income tax purposes, but inheritance tax is a whole different kind of tax.


Enjoying life!

[Winemaker]

My point was they don't tax the distributions now, attract us rich geezers, then tax our heirs when we croak!

[Souschef]

Thank you for the information. When my MIL passed, we cleaned out all the savings accounts and took the checks home to CA with us. I had a notion at the time to tell PA to pound sand about the tax, but they are apparently very aggressive about collecting it.
I opted to pay the tax and sleep nights without worrying.