Viewing a single comment thread. View all comments

Aisling207 t1_jbgt2cr wrote

Reply to comment by HomicidalHushPuppy in Pennsylvania has No. 4 highest tax rates in U.S.: report by dissolutewastrel

I don’t know why the PA death tax doesn’t get more attention!

9

start260 t1_jbh10q6 wrote

It brings in about a billion a year. And the income tax on fees paid to estate planning lawyers for those trying to avoid the tax, probably brings in more than that.

7

Aisling207 t1_jbh3ly2 wrote

I’d love to see a source on that estimate. As for lawyers’ fees, that’s bs; you can’t avoid it. And there’s no amount exempt; you pay it if your estate is $10 or $10 million.

0

Creative_Camel t1_jbh437v wrote

If you place assets in a trust you can avoid probate taxes. I’m not a lawyer but those who do these things say that’s what you can do

4

Aisling207 t1_jbh4zor wrote

Not true. A living trust avoids probate, but does not shield assets from inheritance tax.

1

Creative_Camel t1_jbh5kbu wrote

Irrevocable trusts avoid these:

https://bononiandbononi.com/blog/2022/02/how-to-avoid-pennsylvania-inheritance-tax/

1

hippata2023 t1_jbhl03i wrote

That's bad information, which is surprising come from a law firm.

While joint assets will avoid probate, they're still subject to PA inheritance tax. My grandmother got nailed with this because she comingled (joint bank account) her monies with my aunt (my aunt had a long, hard road to death through severe dementia and multiple strokes). She did it because she found it easier to manage my aunt's estate while she was alive. When my aunt died, my grandmother was on the hook on paying tax on the half the balance of this account -- even though, by this time, most of the funds in the account were my grandmothers, not my aunt's. Yes, she was taxed on her own money.

Joint assets held by spouses will avoid the inheritance tax, but that's it. Only spouses.

Regarding irrevocable trusts, I researched this awhile ago and can't quite get back to it. While most states do observe irrevocable trusts as a way to avoid probate, PA is a weird one in that in order to do so, the trust has to meet certain conditions. 2 common conditions found in irrevocable trusts: the right to income and the right to change beneficiaries, will make the irrevocable trusts subject to inheritance tax, even if it avoids probate.

TL;DR: talk to an estate lawyer

5

Aisling207 t1_jbh5xjp wrote

And most people won’t do those because they lose control of their assets.

2

Creative_Camel t1_jbh6v1z wrote

Understood and some will instead choose a life insurance policy to pay the taxes or move to Florida or NH

2

Aisling207 t1_jbh7b89 wrote

Which makes it a tax that falls disproportionately on those without the means to afford those options.

3

start260 t1_jbhbfrs wrote

https://www.penncapital-star.com/blog/revenue-dept-pa-collected-3-8b-in-tax-revenue-in-december/

1

Aisling207 t1_jbhc5nn wrote

So, substantially less than $1 billion.

1

start260 t1_jbhg2zs wrote

That’s still a substantial amount of tax revenue. However I did not realize how much the revenue has gone down. The feds getting rid of the estate tax which effectively repealed the Pa Estate tax and legislation allowing the ability to pass down family owned businesses and farms without paying the tax has had a huge effect on revenue. So yes there are ways to avoid the tax and Estate lawyers do earn their keep.

1

Aisling207 t1_jbhhibv wrote

There really are not practical ways for the vast majority of people to avoid the inheritance tax.

1

psychcaptain t1_jbh4yxy wrote

Because it doesn't really matter to most people? Honestly, inheritance tax is still such a pittance, and does nothing to prevent the concentration of wealth into a new, crappy aristocracy.

The fact that people like Paris Hilton exist is a reason to support 100% I heritage tax when only adults are involved.

−3

Aisling207 t1_jbh5g3p wrote

It applies to everyone, not just wealthy people. And it disproportionally affects unmarried people and people without children.

3

psychcaptain t1_jbh6j9s wrote

You're dead, so saying it applies to someone is a stretch.

−1

Aisling207 t1_jbh8f6f wrote

The person who pays the tax is the person who inherits. If one half of an unmarried couple dies, the other owes PA 15% of their partner’s share of their home and bank accounts.

5

psychcaptain t1_jbh8l5t wrote

Unmarried seems like an easy problem to solve, doesn't it?

Honestly, if a couple can be bother to do the bare minimum, I am not going to bother caring.

−7

Aisling207 t1_jbh96za wrote

That’s a very uninformed comment. Some people would lose pension and/or social security benefits that they need to live on if they remarry. Or the ability to be buried with a military vet former spouse.

3

psychcaptain t1_jbha2ev wrote

So, basically, they want to have their cake and eat it?

Yeah, I don't have much sympathy for people trying to game the system.

−4

Aisling207 t1_jbhbh6p wrote

So a widow trying to scrape by on a pension they’d lose if they remarry is gaming the system? I guess widows should retreat into perpetual mourning and never find another relationship to satisfy your “sympathy” requirements. Good grief. Literally.

2

psychcaptain t1_jbhcdlb wrote

I don't think Pensions are written the way you think they are.

Those that are a based on the idea of 'double dipping' where the money is a last resort. If you happen to get married, than the last resort shouldn't be necessary any more.

0

Aisling207 t1_jbhdhxs wrote

I’m very familiar with pensions, including civil service, military, and private company pensions, as well as social security, thanks to helping several older relatives deal with their reduced pensions and social security benefits upon the death of a spouse. I honestly have no idea what you mean by “double dipping” or “last resort.” Do you know any retirees or widows?

Perhaps you think everyone should have an IRA or 401(k)? Well, many current retirees spent their main working years before those were the main way to save for retirement. And many people spent years out of the workforce caring for children or elderly relatives (for no pay).

It’s easy to be unsympathetic to hypothetical situations. When you actually see people struggling, it gets real.

2

psychcaptain t1_jbhflr7 wrote

I am unsympathetic to Babies Boomers who voted GOP for decades, and now getting hurt by their own rules.

I do now a bit about Social Security Benefits though. As a widow, you get up to 75% of your spouses PIA as long as it doesn't exceed your benefits. Homemakers are screwed by this, but so is everyone without an income, whether you are married or not. God, if you have been disabled for a while, that's a lot of potential income you have lost for Social Security Benefits. You do get COLA.

But, I digress. As widow (er), you can get up to 75% of your spouses PIA, as long as it doesn't exceed your own Payments. Depending on the situation, that should be more than half the income people usually get, which makes some sense, because it's supporting half the people.

Here's the thing, if you remarry before 60, you might lose it (unless you divorce again), but if you remarry after 60 you don't.

If you remarry before 60, hopefully you are working and making your way in the world, and of reliant on your dead husbands pension.

−1

Aisling207 t1_jbhh4cp wrote

Oh, cool, I see we’ve moved into the ASSumption phase here. News flash: not all Silent Generation and Baby Boomers voted GOP. Not all of them lived in PA for their entire voting/working lives.

Social security is one thing. Pensions are absolutely lost upon remarriage. And the thing is, half of one’s expenses don’t disappear when one spouse dies. Some expenses decrease, but not all, and often not by half. And some widowed spouses are caring for minor children.

But, whatever. The fact is that one half of an unmarried couple, whether it is a romantic couple, relatives or roommates should not have to lose their home to pay the state when someone dies.

3