• Wills
• Estate Settlement
• Inheritance Tax for Pennsylvania Residents
• Power of Attorney
• Living Will
• Real Estate

Wills

A Last Will and Testament is a written document designed to give detailed instructions as to what will happen upon the death of the person who wrote the “Will” called a Testator or Testatrix.  The “Will” must be written but can be handwritten by the Testator.  The primary purpose of the “Will” is to gift, give away, sell or otherwise transfer the worldly possessions of the Testator to those people or charitable organization named in the “Will”.

A personal representative called an Executor or Executrix should be named in the “Will” to carry out the intent of the instructions of the “Will”.  The Executor legally steps into the shoes of the decedent.  Performs any distribution of assets to heirs can begin the Executor must first pay all of the funeral expenses, debts of the decedent and taxes.

A Last Will and Testament is a must for everyone and can be prepared inexpensively.

Estate Settlement

When a person dies, it is often necessary to follow formal procedures in settling the estate.  The process is called Estate Administration.  Both state and federal law establish certain requirements which must be followed.  Administration includes procedures and requirements relating to collecting of assets, satisfying of obligations such as debt, expenses and tax preparation, and filing and distribution of property to heirs and beneficiaries.

• What should be done first?
  If someone close to you has died, make sure that their home is secure and nothing is lost or destroyed.  It is illegal in Pennsylvania to enter a safe deposit box without notifying the Pennsylvania Department of Revenue or its authorized representative so that the contents of the box can be inventoried.  Shortly after the funeral, an attorney should be contacted by the survivors to discuss the estate.  The attorney will provide advise, determine whether administration will be required and explain what procedures will be involved.  If there is a will, the person named as executor should protect the will and give it to the attorney at the first meeting.

 
• When is formal estate administration required?
  In almost every case when a person dies having personal property or real estate, an estate must be administered.
  
  
• Who administers and estate?
  An estate is administered by a personal representative.  If there is a will, the personal representative named in the will is the executor.  If there is not a will, it is the administrator, who is chose by the Register of Wills.  The personal representative works with an attorney in complying with necessary legal requirements.
  
  
• What does a personal representative do?
  The personal representative is charged with the actual administration of an estate, and has the responsibility for performing all functions that are required.  This includes following the directions of the decedent (the deceased person) if there is a will, or following the requirements of the law if there is not a will.  The representative also gathers information about the assets of the estate and the debts, notifies the beneficiaries under the will or the intestate heirs, pays all debts and expenses as well as inheritance taxes, and distributes the assets to the beneficiaries.
  
  
• Should I have an attorney to assist in the administration of the estate?
  As a practical matter, it is very difficult for a non lawyer to correctly follow the required procedures in administering an estate without the assistance of an attorney.  The personal representative selects the attorney for the estate, often the same attorney who prepared the will.  An attorney can also be located by calling the Pennsylvania Bar Association’s Lawyer Referral Service toll-free at 1-800-692-7375.  Most counties have this same service at the local level.  Check your yellow pages under “attorneys” for more details.
  
  
• What happens during the Administration?
  At the beginning, all assets of the estate, including personal possessions and real estate are inventoried and sometimes physically gathered.  All of the beneficiaries (if there is a will) or heirs (if there is no will) are located.  They are told that they were named in the will or have a legal right to receive an inheritance.  Funeral expenses, debts, state and federal taxes are paid, and necessary tax returns are filed.
  
  Sometimes administration may involve the short-term management of a business or corporation or sale of a business or stock in a corporation.  There could also be sale of real estate which was owned by the deceased.
  
  At the conclusion of the administration period, a final accounting of all assets is presented for approval to the county court.  After approval, distribution of the balance of the assets is accomplished.
  
  
• What fees are paid during administration?
  In addition to court costs, fees (usually based on a percentage of the gross value of the estate) are paid to the attorney and to the personal representative.  These fees are paid out of the assets of the estate.  Fee arrangements should be discussed during the first visit to the attorney who will be involved in the administration of the estate.

• What are the Inheritance Tax rates for a surviving spouse?
  The rate of tax imposed on transfers to the surviving spouse are based on the date of death of the decedent as follows:

Date of death on or after January 1, 1995 - 0% tax

Date of death after June 30, 1994, and before January  1, 1995 - 3% tax

Date of death before July 1, 1994 - 6% tax

• Who are considered to be lineal heirs and lineal descendants for the purpose of Inheritance Tax?
  Lineal heirs are grandfather, grandmother, father, mother, and their children.  “Children” include natural children, whether or not they have been adopted by others, adopted children and stepchildren.
  
  “Lineal descendants” include all children of the natural parents and their descendants, whether or not they have been adopted by others, adopted descendants and their descendants and step descendants.
  
  
• Is there a discount allowed on PA Inheritance Tax?
  The tax is due at the date of death and becomes delinquent nine months after the date of death.  There is a discount of 5% of the tax paid or the tax due, whichever is less, when the payment is made within three months of the date of death.
  
  
• What property is subject to Inheritance Tax?
  All real property and all tangible personal property of a resident decedent, including but not limited to cash, automobiles, furniture, antiques, jewelry, etc., located in Pennsylvania at the time of the decedent's death is taxable.  All intangible property of a resident decedent including stocks, bonds, bank accounts, loans receivable, etc.  is also taxable regardless of where it is located at the time of decedents death.
  
  In the case of a non resident decedent, all real property and tangible personal property located in Pennsylvania at the time of the decedent’s death is taxable.  Intangible personal property of a nonresident decedent is not taxable.
  
  Jointly owned property with right of survivorship except between husband and wife, including but not limited to real estate, securities, bank accounts, etc.  is taxable to the extent of the decedent's fractional interest in the joint property (calculated by dividing the value of the joint property by the number of joint owners at the time of the decedent’s death).  Joint property is taxable even though the decedent’s name was added as a matter of convenience.  Further, if the decedent created the joint interest in the property within a year of his/her death, the full value of the property is taxable in the decedent’s estate.
  
  
• Can the funeral expenses and unpaid bills of the decedent be deducted from the amount subject to tax?
  Yes, Unsatisfied liabilities incurred by the decedent prior to his/her death are deductible against his her taxable estate.  In addition to debts incurred by the decedent or the estate, the cost of administration of the estate, attorney fees and fiduciary fees incurred to administer the estate funeral and burial expenses, including the cost of burial lot, tombstone or grave marker, and other related burial expenses, are deductible.
  
  For the sake of convenience, I put my mother’s name on my savings account.  Recently my mother died and now I am being told that I will have to pay an Inheritance Tax on my own money.  Can this be correct?
  
  Under the Inheritance Tax law, the account was jointly owned because you and your mother had equal access to the account.  Therefore, in this example, the survivor is taxed on one-half of the amount of the account.
  
  
• Was the “widows tax” repealed in Pennsylvania?
  Previously, transfers to surviving spouses were taxed and this was commonly known as the ‘widows tax”.  The tax rate for transfers to a surviving spouse is now zero when the decedent died on or after January 1, 1995.  A Pennsylvania widow or widower pays no tax on assets which are inherited from a deceased spouse.
  
  
• What is the family exemption and how much can be claimed?
  The family exemption is a right given to specific individuals to retain or claim certain types of decedent’s property in accordance with Section 3121 of the Probate, Estate and Fiduciaries code.  For decedents dying after January 29, 1995, the family exemption is $3,500.00.  From June 27, 1974 through January 29, 1995, the amount of the family exemption was $2,000.00.
  
  
• Who is entitled to claim the family exemption?
  The family exemption may be claimed by a spouse of a decedent who died as a resident of Pennsylvania.  If there is no spouse, or if the spouse has forfeited his/her rights, then any child of the decedent who is a member of the same household as the decedent may claim the exemption.  In the event that there is not spouse or child, the exemption may be claimed by a parent or parents who are members of the same household as the decedent.  The family exemption is allowable against assets which are passed on with or without a will.
  
  
• Where is the Inheritance Tax return to be filed?
  If the decedent was a resident of the Commonwealth of Pennsylvania at the time of his/her death, the inheritance tax return is to be filed in duplicate with the Register of Will in the county were the decedent was a resident at the time of his/her death.  If the decedent was a nonresident of Pennsylvania, with the Register of Will that issues Letters Testamentary or Letters of Administration, if any.  Otherwise, the inheritance tax return is to be filed with the Department of Revenue, Bureau of Individual Taxes.


For additional information, call (717) 787-8327 or write to the Inheritance Tax Division at:
        PA Department of Revenue
        Bureau of Individual Taxes
        Dept.  280601
        Harrisburg, PA 17128-0601

SPECIAL NOTE: THIS INFORMATION IS TO INFORM NOT TO ADVISE.  IT IS BASED ON PENNSYLVANIA LAW.  THE STATEMENTS ARE GENERAL AND INDIVIDUAL FACTS IN A GIVEN CASE MAY ALTER THEIR APPLICATION OR INVOLVE OTHER LAWS NOT REFERRED TO HERE.

THIS INFORMATION HAS BEEN MADE AVAILABLE TO YOU AS A PUBLIC SERVICE BY THE PENNSYLVANIA BAR ASSOCIATION, PA DEPARTMENT OF REVENUE AND THE PENNSYLVANIA BAR TRUST FUND, WITH THE COOPERATION OF YOUR LAWYER AND LOCAL BAR ASSOCIATION.

Living Will

A Living Will is a written document commonly referred to as the right to die with dignity document.  The Living Will is designed to give detailed instructions as to what will happen should a person become so incapacitated physically and mentally, that there is no longer any quality of life.  Once it has medically been determined that a person is in a vegetative catatonic state and that the removal of life sustaining hospital procedure would cause death the “Living Will” grants legal authority to remove the life sustaining hospital procedure.

A Living Will is expensive to prepare and generally recommended for the elderly.

Real Estate

The sale or purchase of real estate can be complicated if not handled
properly by a real estate professional.  Every property bought or sold must first begin with a written contract called an “Agreement of Sale”.  Remember everything is negotiable and the terms of the “Agreement of Sale” are dictated by the buyer and seller.

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