Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.Pennsylvania collects an inheritance tax when property is left to people who weren’t closely related to the deceased person. The tax rate depends on how closely the inheritors and deceased person were related—the closer the family connection, the lower the tax rate.This classification determines the tax rate that is applied to the value of the inherited property. Your children would be in a Class A. Members of Class A pay a 4.5% inheritance tax on what they inherit.If you transferred the assets prior to your passing you would be required to report the gifts but you would not pay tax unless you are over your lifetime limit.This would also mean that your children would not receive the step up in value and may owe tax when the dispose of the property.
Essentially then, they will pay the taxes now or later.
Yes, unfortunately. If you you did gift they may pay more on sale because their basis may be very low (depending on your basis which they would retain in a gift situation).
Thank you, Robin.