What Are the Laws Governing an Inheritance in Pennsylvania?

What Are the Laws Governing an Inheritance in Pennsylvania?

Pennsylvania imposes an inheritance tax on residents of the state and nonresident decedents who have real or personal property located in the state, according to Nolo. As of 2016, the tax rate is a percentage of the value of the inherited property, depending on its use and the relationship between the decedent and the beneficiary.

Farmland and small family businesses may be exempt from inheritance tax, if inherited by one or more family members, explains Nolo. Farmland must remain an agricultural property for seven years after it passes to the beneficiary. A small family business, defined as having fewer than 50 employees and less than $5 million in assets, qualifies for exemption if it existed for at least five years and remains active another seven years.

Inheritance received from a spouse is exempt from inheritance tax, according to the Pennsylvania Department of Revenue. A parent inheriting property from a deceased child age 21 or younger is also not subject to the tax. Bequests to charitable organizations and government entities are exempted as well.

Property passing to direct descendants or lineal heirs, such as children and grandchildren, is subject to a 4.5 percent inheritance tax. Transfers to siblings are taxed at 12 percent, and inheritance to all other heirs is subject to a 15-percent tax. These taxes are due on the date of death and become delinquent nine months later, says the Department of Revenue.

The tax is paid by the executor using funds in the estate, notes Nolo. It is paid before beneficiaries receive their portion of the inheritance.