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Bill, Enrolled Agent
Category: Tax
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Experience:  EA, CEBS - 34 years experience providing financial advice
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My mother passed away in March. She had a revocable trust with

Customer Question

My mother passed away in March. She had a revocable trust with me as the successor trustee. Only her home and three CDs were placed in the trust. CDs outside the trust were POD for her three children. She had no debts. All assets avoided probate. For filing an inheritance return in PA as the trustee, I assume I am only responsible for reporting the assets in the trust and paying the taxes from the CDs in the trust. I assume the inheritance taxes due on the POD CDs outside the trust are the responsibility of each beneficiary.
Am I correct?
Submitted: 2 years ago.
Category: Tax
Expert:  Megan C replied 2 years ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

I'm sorry about your loss. Actually, the beneficiaries do not pay any taxes on the CDs. There's no inheritance tax on this. If your mom did not give away more than $5 million during her lifetime, it's safe to say no tax is owed at all.

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Customer: replied 2 years ago.
Relist: Other.
Need a tax professional from PA not Ole Miss
Expert:  R. Klein, EA replied 2 years ago.
Sorry that you are having difficulty.

Pennsylvania's so called "death tax" is an estate tax. As the prior expert noted, a beneficiary never pays any death taxes from their own money. Only an estate can be taxed.

In PA, the state "death tax" or estate tax only is in effect if there is also a federal estate tax. Again, as the other expert noted, an estate tax only comes into effect if the value of the entire state is greater than $5.12 Million.

The estate is the value of all of the assets that the decedent had on the date of her death. This includes the value of assets that pass outside the trust and are Pay On Death types of accounts. It includes any real estate she owned.

If the value of all her things she owned--real property, money, rights, etc.--is less than the $5.12 million, then there is no federal or Pennsylvania estate tax (or death tax).

IF, the estate was worth more than this amount, then the ESTATE must file a tax return and pay any taxes BEFORE distributing the assets. Beneficiaries get their inheritance AFTER all taxes are paid.

https://revenue-pa.custhelp.com/app/answers/detail/a_id/952/~/difference-between-inheritance-tax,-estate-tax-and-death-tax-in-pa%3F

I hope this answers your question today. If you need any clarification, feel free to ask for a follow up.
Customer: replied 2 years ago.

The scope of my question is limited to inheritance taxes, not estate taxes.


I assume you are not a resident of PA.

Expert:  R. Klein, EA replied 2 years ago.
The PA inheritance tax is imposed by the jurisdiction in which the deceased person lived. It IS paid by the estate before the remainder is passed to the beneficiaries based on the assets that are passed whether by probate, will, or transfer of an account, such as a POD. However, an account that had a JOINT ownership prior to death would NOT be a "transfer". The POD only comes into effect as a simplified way to determine the new owner and it is subject to inheritance tax.

You can deduct the value of debts from the assets before calculation of the tax.

The estate is supposed to bear the cost of paying the inheritance tax. However, if assets have been given to beneficiaries outside of passing through the estate, then, yes, the beneficiaries will have to pay from their receipt of the money. However, if the estate can pay the full amount from the remaining assets, then the beneficiaries will not need to pay out of their share.
Expert:  Bill replied 2 years ago.

Another expert here:

Since there are no assets that are being probated, the PA inheritance taxes could not be paid by the estate. The inheritance tax on the POD CDs would have to be paid by the recipients of those assets. You as trustee would be responsible for paying the inheritance tax due on the trust assets from the funds in the trust.

https://revenue-pa.custhelp.com/app/answers/detail/a_id/1303/kw/inheritance%20tax

https://revenue-pa.custhelp.com/app/answers/detail/a_id/897/kw/inheritance%20tax/related/1

Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3079
Experience: EA, CEBS - 34 years experience providing financial advice
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