Legal Question in Wills and Trusts in Pennsylvania

No. She would get them under Florida laws and subject to the taxes imposed by Florida.

{John}

I don't know if Florida charges an inheritance tax. Some states do not. You would need to speak to a Florida probate attorney about that. You do not indicate where your wife lived. Is she in PA as well?

I am inclined to disagree with Attorney Davidson. I think the inheritance tax does apply if the mother in law was a resident of PA because the inheritance tax would apply to all transfers of personal or real property wherever located. According to the PA Revenue Department, one-half the value in the account would be taxable. Who is the executor of the estate? Failing that, check with the Pennsylvania Revenue Department.

Pennsylvania does charge an inheritance tax as follows:

72 P.S. � 9107. Transfers subject to tax

(a) The transfers enumerated in this section are subject to the tax imposed by section 2106.1

(b) All transfers of property by will, by the intestate laws of this Commonwealth or, in the case of a transfer from a nonresident, by the laws of succession of another jurisdiction are subject to tax. The transfer of property of a person determined by decree of a court of competent jurisdiction to be a presumed decedent is subject to tax within the meaning of this section and section 2108.

(c) (1) All transfers of property specified in subclauses (3) through (7) which are made by a resident or a nonresident during his lifetime are subject to tax to the extent that they are made without valuable and adequate consideration in money or money's worth at the time of transfer.

(2) When the decedent retained or reserved an interest or power with respect to only a part of the property transferred, in consequence of which a tax is imposed under subclauses (4) through (7), the amount of the taxable transfer is only the value of that portion of the property transferred which is subject to the retained or reserved interest or power.

(3) A transfer conforming to subclause (1) and made within one year of the death of the transferor is subject to tax only to the extent that the value at the time of the transfer or transfers in the aggregate to or for the benefit of the transferee exceeds three thousand dollars ($3,000) during any calendar year.

(4) A transfer conforming to subclause (1) which takes effect in possession or enjoyment at or after the death of the transferor and under which the transferor has retained a reversionary interest in the property, the value of which interest immediately before the death of the transferor exceeds five per cent of the value of the property transferred, is subject to tax. The term �reversionary interest� includes a possibility that property transferred may return to the transferor or his estate or may be subject to a power of disposition by him, but the term does not include a possibility that the income alone from the property may return to him or become subject to a power of disposition by him.

(5) A transfer conforming to subclause (1), and under which the transferor expressly or impliedly reserves for his life or any period which does not in fact end before his death, the possession or enjoyment of, or the right to the income from, the property transferred, or the right, either alone or in conjunction with any person not having an adverse interest, to designate the persons who shall possess or enjoy the property transferred or the income from the property, is subject to tax.

(6) A transfer conforming to subclause (1), and under which the transferee promises to make payments to, or for the benefit of, the transferor or to care for the transferor during the remainder of the transferor's life, is subject to tax.

(7) A transfer conforming to subclause (1), and under which the transferor has at his death, either in himself alone or in conjunction with any person not having an adverse interest, a power to alter, amend or revoke the interest of the beneficiary, is subject to tax. Similarly, the relinquishment of such a power within one year of the death of the transferor is a transfer subject to tax except as otherwise provided in subclause (3).

(d) All succeeding interests which follow the interest of a surviving spouse in a trust or similar arrangement, to the extent specified in section 2113,2 are transfers subject to tax as if the surviving spouse were the transferor.

72 P.S. � 9111. Transfers not subject to tax

(a) The transfers enumerated in this section are not subject to the tax imposed by this article.

(b) Transfers of property to or for the use of any of the following are exempt from inheritance tax:

(1) The United States of America.

(2) The Commonwealth of Pennsylvania.

(3) A political subdivision of the Commonwealth of Pennsylvania.

(c) Transfers of property to or for the use of any of the following are exempt from inheritance tax:

(1) Any corporation, unincorporated association or society organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation.

(2) Any trustee or trustees or any fraternal society, order or association operating under the lodge system, but only if the property transferred is to be used by the trustee or trustees or by the fraternal society, order or association exclusively for religious, charitable, scientific, literary or educational purposes or for the prevention of cruelty to children or animals, and no substantial part of the activities of the trustee or trustees or of the fraternal society, order or association is carrying on propaganda or otherwise attempting to influence legislation.

(3) Any veterans' organization incorporated by act of Congress or its departments or local chapters or posts, no part of the net earnings of which inures to the benefit of any private shareholder or individual.

(d) All proceeds of insurance on the life of the decedent are exempt from inheritance tax. Refunds of unearned premiums for the current policy period and post mortem dividends shall be considered exempt proceeds.

(e) All proceeds of any Federal War Risk Insurance, National Service Life Insurance or similar governmental insurance are exempt from inheritance tax. Refunds of unearned premiums for the current policy period and post mortem dividends shall be considered exempt proceeds.

(f) The pay and allowances determined by the United States to be due a member of its armed forces for service in the Vietnam conflict after August 5, 1964, for the period between the date declared by it as the beginning of his missing-in-action status to the date determined by it to be the date of his death, are exempt from inheritance tax.

(g) Inter vivos transfers as defined in subsection (c) of section 21071 which might otherwise be subject to inheritance tax are exempt where the transferee is a governmental body as provided in subsection (b) or a charity as provided in subsection (c).

(h) Intangible personal property held by, for or for the benefit of a decedent who, at the time of his death, was a nonresident is exempt from inheritance tax.

(i) A transfer made as an advancement of or on account of an intestate share or in satisfaction or partial satisfaction of a gift by will, but not within the meaning of subsection (c)(3) of section 2107,2 is exempt from inheritance tax.

(j) Adjusted service certificates issued under the act of Congress of May 19, 1924, and adjusted service bonds issued under the act of Congress of January 27, 1936, are exempt from inheritance tax.

(k) Property subject to a power of appointment, whether or not the power is exercised, and notwithstanding any blending of such property with the property of the donee, is exempt from inheritance tax in the estate of the donee of the power of appointment.

(l) Property awarded to the Commonwealth as statutory heir by escheat or without escheat, otherwise than as custodian for a known distributee, is exempt from inheritance tax. Inheritance tax shall be deducted at the applicable rate without interest from any such exempt funds thereafter distributed by the Commonwealth.

(m) Property owned by husband and wife with right of survivorship is exempt from inheritance tax. If the ownership was created within the meaning of section 2107(c)(3),3 the entire interest transferred shall be subject to tax under section 2107(c)(3) as though a part of the estate of the spouse who created the co-ownership.

(n) Property held in the name of a decedent who had no beneficial interest in the property is exempt from inheritance tax.

(o) Obligations owing to the decedent which are worthless immediately before death are exempt from inheritance tax although collectible from the obligor's distributive share of the estate.

(p) The lump-sum death payment from the Social Security Administration or Veterans' Administration or any county veterans' death benefit or other similar death benefit, whether or not paid to the decedent's estate, is exempt from inheritance tax.

(q) The lump-sum burial benefit from the United States Railroad Retirement Board, whether or not paid to the decedent's estate, is exempt from inheritance tax.

(r) Payments under pension, stock bonus, profit-sharing and other retirement plans, including H.R.10 plans, individual retirement accounts, individual retirement annuities and individual retirement bonds to distributees designated by the decedent or designated in accordance with the terms of the plan, are exempt from inheritance tax to the extent that the decedent before his death did not otherwise have the right to possess (including proprietary rights at termination of employment), enjoy, assign or anticipate the payment made. In addition to this exemption, whether or not the decedent possessed any of these rights, the payments are exempt from inheritance tax to the same extent that they are exempt from Federal estate tax under the provisions of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. � 1 et seq.), as amended, any supplement to the code or any similar provision in effect from time to time for Federal estate tax purposes, except that a payment which would otherwise be exempt for Federal estate tax purposes if it had not been made in a lump-sum or other nonexempt form of payment shall be exempt from inheritance tax even though paid in a lump-sum or other form of payment. The proceeds of life insurance otherwise exempt under subsection (d) shall not be subject to inheritance tax because they are paid under a pension, stock bonus, profit-sharing, H.R.10 or other retirement plan.

(s) A transfer of real estate devoted to the business of agriculture between members of the same family, provided that after the transfer the real estate continues to be devoted to the business of agriculture for a period of seven years beyond the transferor's date of death and the real estate derives a yearly gross income of at least two thousand dollars ($2,000), provided that:

(1) Any tract of land under this article which is no longer devoted to the business of agriculture within seven years beyond the transferor's date of death shall be subject to inheritance tax due the Commonwealth under section 2107, in the amount that would have been paid or payable on the basis of valuation authorized under section 21214 for nonexempt transfers of property, plus interest thereon accruing as of the transferor's date of death, at the rate established in section 2143.

(2) Any tax imposed under section 2107 shall be a lien in favor of the Commonwealth upon the property no longer being devoted to agricultural use, collectible in the manner provided for by law for the collection of delinquent real estate taxes, as well as the personal obligation of the owner of the property at the time of the change of use.

(3) Every owner of real estate exempt under this subsection shall certify to the department on an annual basis that the land qualifies for this exemption and shall notify the department within thirty days of any transaction or occurrence causing the real estate to fail to qualify for the exemption. Each year the department shall inform all owners of their obligation to provide an annual certification under this subclause. This certification and notification shall be completed in the form and manner as provided by the department.

(s.1) A transfer of an agricultural commodity, agricultural conservation easement, agricultural reserve, agricultural use property or a forest reserve, as those terms are defined in section 2122(a),5 to lineal descendants or siblings is exempt from inheritance tax.

(t) A qualified family-owned business. The following shall apply:

(1) A transfer of a qualified family-owned business interest to one or more qualified transferees is exempt from inheritance tax if the qualified family-owned business interest:

(i) continues to be owned by a qualified transferee for a minimum of seven years after the decedent's date of death; and

(ii) is reported on a timely filed inheritance tax return.

(2) A qualified family-owned business interest that was exempted from inheritance tax under this subsection that is no longer owned by a qualified transferee at any time within seven years after the decedent's date of death shall be subject to inheritance tax due the Commonwealth under section 2107, in an amount equal to the inheritance tax that would have been paid or payable on the value of the qualified family-owned business interest using the valuation authorized under section 2121 for nonexempt transfers of property. Interest shall accrue from the payment date established under section 21426 at the rate established under section 2143.7

(2.1) The exemption under this subsection shall not apply to property transferred by the decedent into the qualified family-owned business within one year of the death of the decedent unless the property was transferred for a legitimate business purpose.

(3) Inheritance tax due under section 2107 as a result of disqualification under paragraphs (2) or (4), plus interest on the inheritance tax, shall be a lien in favor of the Commonwealth on the real and personal property of the owner of the qualified family-owned business interest at the time of the transaction or occurrence that disqualified the qualified family-owned business interest from the exemption provided under this subsection. The inheritance tax due and interest shall be collectible in the manner provided for by law for the collection of delinquent taxes and shall be the personal obligation of the owner of the qualified family-owned business interest at the time of the transaction or occurrence that disqualified the qualified family-owned business interest from the exemption provided under this subsection. The lien shall remain until the inheritance tax and accrued interest are paid in full.

(4) Each owner of a qualified family-owned business interest exempted from inheritance tax under this subsection shall certify to the department, on an annual basis, for seven years after the decedent's date of death, that the qualified family-owned business interest continues to be owned by a qualified transferee and shall notify the department within thirty days of any transaction or occurrence causing the qualified family-owned business interest to fail to qualify for the exemption. Each year, the department shall inform all owners of a qualified family-owned business interest exempted from inheritance tax under this subsection of their obligation to provide an annual certification under this paragraph. The certification and notification shall be completed in the form and manner as provided by the department. An owner's failure to comply with the certification or notification requirements shall result in the loss of the exemption, and the qualified family-owned business interest shall be subject to inheritance tax due the Commonwealth under section 2107, in an amount equal to the inheritance tax that would have been paid or payable on the value of the qualified family-owned business interest using the valuation authorized under section 2121 for nonexempt transfers of property. Interest shall accrue from the payment date established in section 2142 at the rate established in section 2143.

(5) For purposes of this subsection, the following terms shall have the meanings given to them in this paragraph:

�Qualified family-owned business interest.� As follows:

(i) an interest as a proprietor in a trade or business carried on as a proprietorship, if the proprietorship has fewer than fifty full-time equivalent employees as of the date of the decedent's death, the proprietorship has a net book value of assets totaling less than five million dollars ($5,000,000) as of the date of the decedent's death and has been in existence for five years prior to the date of the decedent's death; or

(ii) an interest in an entity carrying on a trade or business, if:

(A) the entity has fewer than fifty full-time equivalent employees as of the date of the decedent's death;

(B) the entity has a net book value of assets totaling less than five million dollars ($5,000,000) as of the date of the decedent's death;

(C) as of the date of the decedent's death, the entity is wholly owned by the decedent or by the decedent and members of the decedent's family that meet the definition of a qualified transferee;

(D) the entity is engaged in a trade or business the principal purpose of which is not the management of investments or income-producing assets owned by the entity; and

(E) the entity has been in existence for five years prior to the decedent's date of death.

�Qualified transferee.� A decedent's:

(i) husband or wife;

(ii) lineal descendants;

(iii) siblings and the sibling's lineal descendants; and

(iv) ancestors and the ancestor's siblings.