You might have a job or just have retired and you learn suddenly that your Great Aunt Lucy died and named you Executor of her Will. How hard could it be you ask to resolve an estate by yourself without professional advice or a competent professional beside you? You might decide to strike out on your own but before you do, you might stop to ask “is that wise?” As in so many cases the answer is “it depends.”
First question might be do you have the time, the energy, and the patience to deal with the financial institutions, insurance companies, annuity providers and governmental and other entities necessary to conclude the estate competently and in accordance with the law? For that matter, do you know law, procedure and tax laws, in the state of your Aunt’s residence? Lucy might have resided in your home state or in another and what are
the legal requirements to resolve an estate there? The primary jurisdiction will be the State (or for that matter Country) where she resided at the time of her death. If your Aunt owned property in more than one jurisdiction it may be necessary to become involved in a process known as “ancillary probate” to transfer out of state or out of country assets into the names of the beneficiaries indicated in the Will. In that case you might have two attorneys, one in the jurisdiction of your Aunt’s residence and one on the jurisdiction where her other real estate is located. The second attorney could handle the property transfer.
Personal considerations may come to the fore. Can you navigate your way through the competing interests of various beneficiaries or is there only one beneficiary, possibly yourself?
For someone who has never probated an estate the duties might seem protracted and frustrating. If you try to do it on your own, how would you know whether you are doing it correctly?
Whether, as Executor/Executrix of an estate you decide to retain an elder law or estates attorney experienced in the field, which is recommended, or instead to strike out on your own there are a few things you should know. First, your job is not just to satisfy beneficiaries’ interests but also to satisfy the laws of the jurisdiction where Aunt Lucy resided. In Pennsylvania one significant duty is the filing of a Rev-1500, the
Pennsylvania Inheritance Tax Return, and the payment of inheritance taxes. Here is some Pennsylvania background.
Inheritance Tax Is Different From An Estate Tax. Pennsylvania, unlike many other states, has an Inheritance Tax, not an estate tax. Estate tax schedules often begin for estates over a given amount – often over $1 million or more. Pennsylvania Inheritance Tax taxes from dollar one and the rate depends on the relationship of the beneficiary to the decedent. Spouses are “taxed” at zero percent, meaning that, in most cases, probate is not necessary especially where assets are jointly titled and the spouse is the only beneficiary of all remaining assets such as IRA’s. Life insurance proceeds are not taxed at all regardless of relationship.
Children and other “lineal descendants” are taxed at a 4.5% rate. Brothers and sisters of the decedent are taxed at 12% and others at 15%. The Inheritance Tax is generally paid from the estate before the beneficiary even receives the distribution.
The Inheritance Tax follows the jurisdiction of the decedent, not the beneficiary. If the beneficiary of an estate resides outside Pennsylvania but the decedent resided in Pennsylvania the proceeds are taxed under Pennsylvania Inheritance Tax rules with one exception. A non-resident’s Pennsylvania real estate can be taxed for Inheritance Tax purposes.
Non-Probate Property is Still Taxed Unless Otherwise Excluded. Property passed through a revocable living trust is still taxable for Pennsylvania Inheritance Tax purposes. So is property that passes as Payable On Death (POD) or Transfer On Death (TOD). Jointly titled assets are taxable at the proportionate share of the value (unless made joint within one year of the decedent’s death in which case they could be taxable in full).
Out-Of-State Real Estate Is Not Taxed for Pa. Inheritance Tax purposes. If the Pennsylvania decedent owned real estate out of state, such as a shore or vacation property outside Pennsylvania, it is not taxed for Pa. Inheritance Tax purposes.
Tread lightly and get legal representation if you need it.
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.