Estate administration and taxes

On Behalf of | Oct 25, 2022 | Probate And Estate Administration |

If your loved one recently passed away and they named you as the executor of their estate, you could have many different issues to work through. In addition to devastating emotional pain, you might have uncertainty with respect to your responsibilities. It is imperative to handle estate administration matters carefully and find answers to any questions you have.

For example, you should understand various tax-related issues that often arise with respect to estate administration.

Inheritance tax and estate administration

According to the Pennsylvania Department of Revenue, Pennsylvania imposes inheritance taxes, and the tax rate varies based on the heir’s relationship to the decedent. A 5% discount applies to inheritance taxes paid less than three months following the death of the decedent. Inheritance taxes not paid within nine months of the decedent’s death become delinquent.

Transfers to a surviving spouse or from a child to a parent (for children 21 or under) have a 0% tax rate, while the inheritance tax rate for transfers to lineal heirs and descendants is 4.5%. Transfers to a sibling result in a 12% tax rate, and a 15% tax rate applies to transfers to other heirs.

Looking at federal estate taxes

If you are the executor of an estate with significant assets, you could have to file an estate tax return with the IRS and pay estate taxes. According to the Internal Revenue Service, filing a federal estate tax return is necessary if the decedent passed away in 2022 and their gross estate exceeds $12,060,000.

Whether you have to address inheritance taxes or federal estate taxes, it is pivotal to approach taxes and other estate administration issues correctly.