Submitted by dissolutewastrel t3_11m94wq in Pennsylvania
start260 t1_jbh10q6 wrote
Reply to comment by Aisling207 in Pennsylvania has No. 4 highest tax rates in U.S.: report by dissolutewastrel
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.
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.
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
Aisling207 t1_jbh4zor wrote
Not true. A living trust avoids probate, but does not shield assets from inheritance tax.
Creative_Camel t1_jbh5kbu wrote
Irrevocable trusts avoid these:
https://bononiandbononi.com/blog/2022/02/how-to-avoid-pennsylvania-inheritance-tax/
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
Aisling207 t1_jbh5xjp wrote
And most people won’t do those because they lose control of their assets.
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
Aisling207 t1_jbh7b89 wrote
Which makes it a tax that falls disproportionately on those without the means to afford those options.
start260 t1_jbhbfrs wrote
Aisling207 t1_jbhc5nn wrote
So, substantially less than $1 billion.
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.
Aisling207 t1_jbhhibv wrote
There really are not practical ways for the vast majority of people to avoid the inheritance tax.
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