Q: Our dad was hospitalized with a stroke and pneumonia, and he has a will. My sister and I knew we were getting this property in the will, but the will was 125 miles away and we did not want at that point to leave his side for that length of time to see what the rest of the will read for fear of him dying before we returned. He could not speak because of the stroke so we had to ask questions and he would answer yes or no by hand squeezes. He instructed us to transfer his house through power of attorney to our joint names and we did. It turned out we probably should not have, because I think he was not thinking properly at that point do to drugs and the stroke, and my sister and I were grief stricken and tired from being by his side until he died. Since we were getting the house by will anyway, in hind sight it did not seem to make any sense to transfer it, so we figured he knew something we did not. But, I do not think he was thinking right at that time. (Pittsburgh, PA)
A: Assuming the POA authorized you to transfer real estate or make gifts to yourselves, and even if it didn’t, if no other family members are complaining or you haven’t violated state law, you should be OK. No harm, no foul. If, on the other hand, you transferred his real estate to yourselves with the POA when other family members were to inherit the real estate through the will, there might be a concern. In PA, a transfer in anticipation of death (within 1 year) will subject the entire value of the property transferred to inheritance tax with a $3000.00 exclusion. The only other concern would be Medicaid. If your father was receiving Medicaid benefits, they may have a claim against his estate. If you transferred property out of his estate, Medicaid will have a claim against the real estate as part of his estate as it was transferred in anticipation of his death. If you did this transfer with knowledge of his Medicaid status, you have committed Medicaid fraud but will probably not be prosecuted criminally if the house is still in your name.
Q: Both of my parents have recently passed. first my mother, then my father within an eleven-day span. I am the executor of the will and want to proceed in filing out whatever forms need to be filed and to carry out the will. I just need to know exactly what information to take to the courts to obtain the short certificate and be named legal executor. The only assets that my parents have left is a bank account with about $3000 in it as they were both in an assisted living facility before there death. (Pittsburgh, PA)
A: If there is only one asset as you mention, and it is in your parent’s name, you will not have to open an estate. Per statute, the bank can release less than $10,000.00 to certain next of kin if a paid funeral receipt is produced. There will be inheritance tax owed. Also, you need to be aware that if your parents received Medicaid, this money may not be free and clear to disburse. If this matter is a simple as you state, an attorney can assist you in getting the money and prepare an inheritance tax for you at a modest fee.
Q: My mom is trying to buy a house soon. She wants to hand down the house to me and my brother in the event something happens to her. Since I’m 26 and he’s under 18, how does inheritance tax and exemptions work? If he were to be still under 18 in that event, would he legally be able to accept it? (Pittsburgh, PA)
A: Mom handing over a home to a 26-year-old and a minor may not be advisable. Additionally, I do not believe a minor can hold title to real estate. Your mother should consult with an elder law attorney who can assess her entire financial and personal situation and recommend the best options for her. Perhaps putting the house in a revocable trust is beneficial, but no one can tell without more information. The inheritance tax rate for children is 4.5% and it is practically unavoidable unless mom transfers the house out of her name altogether. Whether the potential consequences of doing that is advisable given the low rate of inheritance tax would be her decision. Additionally, not knowing the entire picture here, your mother should be advised of Medicaid implications with such transfer if she will potentially need Medicaid coverage in the next five years.
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.
Q: My husband, deceased Aug 2017, had some property in his name only, this property was purchased before we were married, and one piece was purchased after marriage, is this property taxed as inheritance tax for me (spouse). Is there anything taxable to me (spouse) as inheritance? I live in Allegheny County, in Pennsylvania. (Verona, PA)
A: If the property is in his name only and not in his name and yours, as husband and wife, it will pass to the heirs named in his will. If he has no will it will pass in accordance with the PA intestate succession statute. As applicable to spouses, the first 30K will pass to the spouse and the balance will be shared by the spouse (50%) and the children of both (50%). Spouses are subject to a PA inheritance tax rate of 0% and children, 4.5%. This means that if the house is worth 100K, 65K passes to the spouse but is taxed at 0% and the spouse will therefore pay no inheritance tax. 35K passes to the children and is taxed at a lineal rate of 4,5%. Permissible deductions may apply to further reduce tax liability. I suggest you meet with an attorney to prepare the inheritance tax return.
Q: My brother passed away with no will and my mother inherited his estate property, a $53,000 house property, and $88,000 from 401k. My question I need to know about how much she pays out on taxes and will this affect her Medicare in the future. She lives in assisted living section 8 which her rent will go up on this inheritance? (Bentleyville, PA)
A: As long as he had no children or spouse, his parents will be his intestate heirs.An inheritance tax bill will not magically come to you in the mail, unfortunately. You will need to file an inheritance tax return and pay inheritance tax. The law requires this to be filed within 9 months of the date of death. The law also provides a 5% discount if you pay an estimate of inheritance tax within 3 months of death. The applicable tax rate for your mother because she is a lineal heir is 4.5%. Deductions are permitted to be taken on the inheritance tax return for funeral expenses, filing fees, attorney and executor fees and reasonable expenses involving the sale of the home as well as other bills and debt. Depending on how this house and 401K are titled, you may need to open an estate. I would recommend gathering as many documents as you can for his assets, expenses and debts and sitting down with an estate attorney to discuss what you need to do.
Q: Parents bought a home in1972 and lived in it 22 years! Me, the oldest son was their caretaker. Parents died, and I probated filed. I have short certificates. What deed do I use to change names? There is a mortgage, I want to refinance.
A: A deed coming from an estate is normally a fiduciary deed. If there is a mortgagee, you need to notify the mortgagee to see if they approve of a new deed. Some mortgage agreements contain a due-on-sale clause which allows the mortgagee to foreclose if there is new deed filed. It may not be wise to change title on the home if you are going to sell it as there might be capital gain. You also have inheritance tax issues to address. The estate may have other creditors beside the mortgagee. You should be doing this through an attorney.
Q: On August 2, 2017, the real estate closing company was provided with a copy of the Notice of Inheritance Tax Appraisement, Allowance of Disallowance of Deductions and Assessment of Tax the Estate received from the Pa Dept. of Revenue showing that the inheritance tax return was “accepted as filed” and no further tax is due. To date we have not had the courtesy of a reply from the closing company.
A: There is no set rule of law on this but generally, it should be a reasonable time-period. I have waited two weeks and more in these situations. I would goggle them to see if they are still in business, if you are concerned. However, it is doubtful that anything is amiss and remember, August is a vacation month. However, if you don’t hear anything by the end of this first week of September, I would call, again.
Q: My husband passed away 50 days ago at age 66. He took care of everything in the house. I have no idea about his 401K, pension, social security. He passed at age 66. He worked for Rockwell International for over 30 years. I was in huge shock. He almost handled everything in the house. I need a lawyer to help me sort it out.
A: It is not unusual to need a lawyer in your situation. Most people do. At least you know that you need one. All you need to do is locate an estate attorney in your area. Ask around for a referral, talk to people who have used attorneys in these situations. What you describe should not be that complicated or expensive to handle. Rockwell should be able to help you identify his employee benefits, pension, etc., and assist you in at least getting started with the paperwork. An attorney can assist you further and with related inheritance tax and income tax issues. I am sorry for your loss but am confident you can get through this.
Q: My mom is still alive at 83, but 12 years-ago gifted her home to me and my four sisters all individually named on a deed as joint tenants in common with right of survivorship. 10 months-ago one of my sisters passed away. We have been told we now owe an inheritance tax for my sister who passed, portion, plus we had 9 months to have done that, and now owe a penalty for a month as well. We had no idea any of that needed to be done! Is this accurate and how is this inheritance calculated?
A: This sort of thing happens a lot. Somebody was in my office yesterday with the same issue. The four remaining joint tenants will owe inheritance tax on one-fifth of the market value of the home. The value of the home will be based at date of death value of the home at the time your sibling/joint tenant died. Interest begins to accrue on unpaid inheritance at a very small percentage rate after 9 months from the date of death. You can go to the PA Department of Revenue website and calculate interest due on delinquent inheritance tax. I doubt if at only 10 months out, penalties will be incurred. You will need to file an inheritance tax return as soon as possible. More importantly, you should promptly make an estimated payment toward inheritance tax to the Department of Revenue so that interest will stop accruing. This can easily be done by an attorney and I suggest you consult with one.