If you inherit property in Pennsylvania, you may soon be able to avoid the hefty burden of paying inheritance tax! Starting next year, minor children who receive property from a deceased parent who was a Pennsylvania resident will be exempt from the inheritance tax under new legislation put forth by Representative Carl Walker Metzgar.
Pennsylvania inheritance tax is imposed on most property that is transferred at death at a rate of 0%-15% of the value of that property. The specific tax rate that is used depends on the relationship between the decedent and the beneficiary.
Until recently, Pennsylvania law imposed a 4.5% tax on the property that natural parents, adoptive parents or stepparents transfer to or for the benefit of their minor children after the parents pass away. In other words, 4.5% of the entire value of each specific inheritance would be taken from each child. On the other hand, the property that those same parents inherit from their minor children was taxed at a rate of 0%.
In order to solve the discrepancy in the law, Pennsylvania has now eliminated state inheritance tax on transfers from a natural parent, adoptive parent or stepparent to or for the use of a child 21 years of age or younger. Beginning after December 31, 2019, minor children will no longer be liable for tax on the inheritance they receive from their parents, with the inheritance tax rate dropping from 4.5% to 0%.
Representative Metzgar introduced this legislation to the House of Representatives, stating that the purpose of this change was to ensure that minor children who inherit property when a natural parent, adoptive parent or stepparent passes away will not be subject to inheritance tax. This is a step toward his goal of completely eliminating inheritance tax in Pennsylvania.
Even if you are not a child who is 21 years of age or younger who received an inheritance from your parents, Schneider Downs can still help you understand how the Pennsylvania inheritance tax system works and how it may impact your estate. There may be planning opportunities available to help reduce the inheritance tax burden that you or your loved ones may face.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.