Can IRA value be estimated on the PA-REV-1500 or need to be exact?

Q: Our father passed last June, and my brother is executor. My sister handled disbursing the IRA split 5 ways. The executor filled out the PA-REV 1500 inheritance tax form and put an estimate which was $260 under. Is that a red flag? Also does the executor need to have a separate bank account from which to pay the inheritance tax or can it be paid from his personal bank account? (Pittsburgh, PA)

A: The correct way to value assets on the PA inheritance tax return is to obtain the correct date of death value from the financial institution. When the PA Department of Revenue audits the return, it is possible that they will detect the difference and when they issue their Notice of Appraisement, they will require extra tax to be paid, if the asset is in fact undervalued. There is a bit of confusion as to what is going on here. Are there other estate assets? Is there a will and if so does it permit inheritance tax owed on non-probate assets to be paid from probate money? If this IRA is the only asset, inheritance tax can be paid by one heir, two heirs, or all heirs from their personal accounts. As long as it is paid, the DOR does not care by whom. I would pay for a consultation with an estate attorney to make sure you are doing this correctly and if it is determined that you are not, let the attorney handle this. You have potential income tax issues with any IRA. It may be beneficial to the heirs to pass the income tax on this IRA to the heirs to report on their individual income tax returns instead of accounting for income on the estate 1041 and paying the much higher tax rate.

If you feel like this issue relates to you, or a problem that you are experiencing, please contact me so that we can discuss your situation.