Exemptions from the Pennsylvania Inheritance Tax

The Pennsylvania Inheritance Tax is not levied on all assets. Certain assets are exempt.

• Family Farm Exemption: If the deceased’s farm falls into a specific category, the land can pass free of the Pennsylvania Inheritance Tax:
  • The farmland must transfer from the deceased to one of the deceased’s family.
  • The farmland must continue to be devoted to agricultural business for at least 7 years.
  • The farmland must produce an annual gross income of at least $2,000.
• Life Insurance Exemption: Life insurance payments on the life of the deceased are exempt from the Pennsylvania Inheritance Tax. It does not matter if they pass to the estate or directly to the beneficiary.

Expenses that can be deducted on the Pennsylvania Inheritance Tax Return

The Pennsylvania Inheritance Tax is levied on the fair market value of the deceased’s assets, but the gross number can be reduced in two ways.

• Deductions for Estate Expenses: The Pennsylvania Department of Revenue allows you to deduct expenses that were incurred while administrating the estate. Typical examples include the executor’s fees, the probate lawyer’s fees, filing fees at the Register of Wills and funeral expenses.
• Deductions for Debts of the Descendant:The Pennsylvania Department of Revenue also allows deductions for the deceased’s debts that the executor subsequently paid. Typical examples are credit card bills, mortgages and income tax payments to the IRS or the Department of Revenue.

Preparing the Pennsylvania Inheritance Tax Return

The Pennsylvania Inheritance Tax is levied on the fair market value of the deceased’s assets, but the gross number can be reduced in two ways.

The Probate Attorney typically prepares the Inheritance Tax Return. An accountant can prepare the return but many accountants are unfamiliar with the return. A typical arrangement for an estate is that the accountant prepares the deceased’s final income tax returns while the probate lawyer files the inheritance and estate tax returns.

A good understanding of estate and inheritance tax returns by the Probate Lawyer will reduce the overall cost to the estate. An experienced probate team will be assembling and gathering the data necessary for the return at the same time assets are being gathered from the banks or property is being sold.

Contact an estate planning law firm you can trust.

For compassionate estate planning services in Philadelphia and throughout Pennsylvania, call Klenk Law at 215-515-2904 or contact us online to schedule a consultation.