What Assets are Not Subject to Pennsylvania Inheritance Tax?

December 26, 2024 by Leave a Comment

Pennsylvania inheritance tax is due within 9 months of a person’s date of death on the value of any assets owned by the decedent and passed on to his or her beneficiaries. Here are 23 assets that are not subject to Pennsylvania inheritance tax.  

life insurance policy
  • Life Insurance. Life insurance is exempt from Pennsylvania inheritance tax, whether it is paid directly to a designated beneficiary or to the decedent’s estate. You may hear that if the life insurance is payable to the estate, then it is subject to Pennsylvania inheritance tax, but this is not accurate. Although it is often a good idea to not name the estate as beneficiary of life insurance for other reasons, such as protection of the life insurance proceeds from creditor claims, all proceeds from life insurance on the decedent’s life are exempt from inheritance tax. Note that refunds of unearned life insurance premiums for the current policy period and post-death dividends are also treated as exempt life insurance proceeds.   
  • Property Owned Jointly between Spouses. Assets owned jointly between spouses, such as joint bank accounts and real estate owned jointly with right of survivorship, are not subject to Pennsylvania inheritance tax. Additionally, there is no need to even report property owned jointly between spouses on the Pennsylvania inheritance tax return. Jointly owned assets are normally reportable for non-spouses on Schedule F of the tax return, but the Pennsylvania Department of Revenue’s instructions to Schedule F make clear that jointly owned assets need not be reported in the case of a married couple. If all property of the decedent was owned jointly between spouses, there is no duty to even file a Pennsylvania inheritance tax return.
  • Real Estate Owned as Tenants by the Entireties. Married couples in Pennsylvania often own real estate as “tenants by the entireties.” It is not uncommon to see married couples own their primary residence in this manner for estate planning reasons and for the protection from creditors titling real estate in this way can provide. It is a form of ownership where each member of the couple is deemed to own 100% of the real estate and is exempt from Pennsylvania inheritance tax.
  • Inheritance from Predeceased Spouse. Assets passing to a surviving spouse that are not jointly owned must be reported on the PA inheritance tax return. They are technically taxable, but are taxed at a zero rate, so no tax is due. Even though no tax is due, an inheritance tax return should be filed reporting the assets passing to the surviving spouse, “taxed” at zero percent.
  • Assets Passing from Deceased Child to Parent. If a child aged 21 or under predeceases a parent, no inheritance tax is due on assets passing to the parent from the child. This exception applies to assets passing to a natural parent, adoptive parent, or stepparent. Though taxable, the tax rate is zero percent.
  • Assets Passing from Parent to Child 21 or Younger. Like the exception above, if a parent dies and leaves assets to a child who is 21 or younger, the tax rate is zero. This exception came into effect on January 1, 2020. The term parent includes a natural parent, adoptive parent, and stepparent.
  • Property Passing from Certain Deceased Members of the Military. Effective September 6, 2022, assets passing from members of the military who died because of an injury or illness received while on active duty in the armed forces, reserve component, or the National Guard, are exempt from Pennsylvania inheritance tax.
  • Certain Farmland Property. Since June 30, 2012, certain farmland and agricultural property has been exempt from Pennsylvania inheritance tax if it passes to qualifying family members. Special rules exist, so if this exemption might apply in your case, review Pennsylvania Department of Revenue Inheritance Tax Information Notice 2021-01 for details and meet with an estate attorney to be sure the inheritance tax return is prepared properly, and that the criteria for the exemption are met.
  • Charitable Gifts. Assets given to charitable organizations are exempt from Pennsylvania inheritance tax. The gift to the charity must be set forth in the will, trust, or beneficiary designation to qualify for the charitable exemption. Assets “donated” by an executor to a charity or by the estate beneficiaries in memory of the decedent do not qualify for this exemption.
  • Assets Passing to the Government. If there is no will or beneficiaries who would  inherit under Pennsylvania law in the absence of a will, then it is possible for estate assets to be distributable to the Commonwealth of Pennsylvania as a “Statutory Heir” and would be exempt from Pennsylvania inheritance tax. Although rare, gifts to the United States of America, the Commonwealth of Pennsylvania, and political subdivisions of the Commonwealth of Pennsylvania are exempt.
  • Tangible Personal Property of No Value. Many items of tangible personal property are special, and valuable to the family, or may be of utility to someone, but are of no financial value. A best practice is for the personal representative of the estate (executor or administrator) to have a licensed appraiser walk through the house, taking pictures, and provide an appraisal of the tangible personal property. In many cases much of the property will be of no monetary value, and no tax will be due. Even if the property is appraised at no value, it should be reported on Schedule E of the Pennsylvania inheritance tax return setting forth $0.00 as the value.
  • Property in Another State. Tangible personal property and unsold real estate located outside of Pennsylvania titled to the individual name of the decedent is not subject to Pennsylvania inheritance tax. However, if out-of-state real estate was under an agreement of sale prior to date of death, then the proceeds received after death may be subject to inheritance tax.
  • Junk Car. Junk or worthless cars should be appraised and set forth on the inheritance tax return even if of no value. If of no value, there would be no tax due.
  • Most Lifetime Transfers. Gifts and transfers made more than one year before death are exempt from Pennsylvania inheritance tax.
  • Lifetime Gifts up to $3,000 Annually, Per Person. Lifetime gifts made within one year of death are subject to Pennsylvania inheritance tax, but there is an exemption you can claim of up to $3,000 per person per calendar year for those transfers that occurred within one year of death.
  • Advancements. Sometimes parents give a child money during their lifetime, specifying that it is an “advance” towards their future inheritance. For example, if one child of four is facing financial hardship such as going through a divorce or period of unemployment, the parent may help the child but want the estate to be adjusted in the future, so all children are treated equally. An “advancement” is not a gift and serves to the share distributed to the beneficiary from the estate. Unless the advancement occurred within one year of death, it is not subject to Pennsylvania inheritance tax.
  • Death Benefits from Social Security. Lump sum death benefits from the Social Security Administration, whether paid to the decedent’s estate or to a family member of the decedent are exempt.
  • A qualified family-owned business interest. Certain family business interests are exempt from Pennsylvania inheritance tax. The business must continue to be owned by the same family, or by a trust whose sole beneficiaries are the same family, for at least seven years after the decedent’s passing, and is reported on a timely-filed inheritance tax return.
  • Worthless Debts, Including those of Estate Beneficiaries. Obligations owed to the decedent which are worthless immediately before the decedent’s passing are exempt from inheritance tax even though collectible from the debtor’s distributive share of the estate. See 72 P.S. 9111(o) for the statutory authority permitting this exemption.
  • Pennsylvania State Employee’s Retirement System. Payments from a deceased Pennsylvania state employee from the Pennsylvania State Employees’ Retirement System are exempt from state and local tax, notably to include Pennsylvania inheritance tax with limited exceptions.
  • Individual Retirement Accounts and 401K of Decedent Under Age 59 ½. IRAs and 401K retirement accounts of a non-disabled person who died before attaining age 59 ½ are not subject to Pennsylvania inheritance tax. If the person died before attaining age 59 ½ but was disabled, then the IRA and 401K are subject to Pennsylvania inheritance tax. A Roth IRA is subject to inheritance tax regardless of the age when the owner dies, and regardless of whether the owner was disabled. A special rule applies for the owner of a 401K who dies before attaining age 59 ½, in that if the owner of the 401K possessed the legal right to terminate the 401K plan during his or her lifetime, then it would be subject to Pennsylvania inheritance tax regardless of age, and regardless of disability status.
  • Family Exemption. Certain individuals residing with a person at the time of death “as a member of the same household” are entitled to claim what is known as a “family exemption.” At the time of this writing the family exemption is $3,500 and is not subject to inheritance tax. The family exemption can be claimed by a surviving spouse, child, or parent, in that order. The family exemption cannot be claimed against joint or non-probate property.
  • 529 Education Investment Plans. The College and Career and Savings Program Account, administered by the Pennsylvania Department of Treasury, is exempt from Pennsylvania inheritance tax, and is the only 529 Education Investment Plan that is exempt from PA inheritance tax.

If you have any questions about Pennsylvania Probate or preparing a Pennsylvania REV-1500 Inheritance Tax Return call Gregory J. Spadea at the Law Offices of Spadea & Associates, LLC, at 610-521-0604. 

Filed Under: Estate Planning, Federal Tax, Tax Exemptions

Why I Can Not Disinherit My Spouse in Pennsylvania

February 7, 2022 by Leave a Comment

Although Pennsylvania generally allows deceased spouse (Testator) to give their property to anyone they wish, this right is limited by a law referred to as an elective share which is designed to protect surviving spouses from being disinherited.   Before any property is distributed, the spouse is entitled to a family exemption of $3,500 from the estate.  A spouse can then inherit anything left to her in her deceased spouse’s will. However, if the decedent disinherited her (left her out of the will), she is still entitled to inherit and claim her “elective share.” Section 2203 of the Pennsylvania Code sets the elective share at one-third of the decedent’s estate. If the spouse was left out of the will or was left less than one-third of the estate, she has the right to request her elective share from the orphan’s court in the county the estate was probated in.  The Elective share will only be paid if the surviving spouse claims it within six months of the Testators death the date of probate whichever is later.  The disinherited spouse must notify the Orphans’ Court and the Executor or Administrator of her intention to claim an elective share, in writing.

When determining how to pay the elective share the Orphans’ Court will attempt to honor the Testator’s will as much as possible. For instance, if the will makes a specific gift and there are sufficient assets to pay the elective share without using the specific gift, the beneficiary of the specific gift will likely receive that item.  If there is not enough probate property to satisfy the full amount of the elective share, all of the remaining probate property is subject to the claim and any  gifts or bequests will be reduced proportionately to pay the remaining balance.

The elective share is equal to one-third of the combined value of the following types of property:

1. Property passing by the Testator’s will.

2. Annuity rights transferred by the deceased spouse.

3. Property transferred within one year of the spouse’s death, to the extent that its value exceeds $3,000.

a. receive income from the property.
b. use the property.
c. take back the transferred property.
d. regain ownership by a right of survivorship.
e. transfer the property by acting alone.

4. Property the deceased spouse transferred during the marriage, but retained the right to:

In addition the disinherited spouse would receive any jointly owned property with the Testator.

Please call Gregory Spadea at 610-521-0604 if you need assistance in claiming the elective share or have any other estate questions.

Filed Under: Estate Planning

Gregory J. Spadea, Esq., Named an ACCREDITED ESTATE PLANNER® Designee

December 26, 2021 by Leave a Comment

Gregory J. Spadea, Esq., Named an ACCREDITED ESTATE PLANNER® Designee by the National Association of Estate Planners & Councils on June 1, 2021

Ridley Park, PA – Gregory J. Spadea, Esq. is newly certified as an Accredited Estate Planner® (AEP®) designee by the National Association of Estate Planners & Councils (NAEPC). His office is the law Offices of Spadea & Associates, LLC located in Ridley Park, PA 19078.

Gregory J. Spadea is a former IRS Agent and Pennsylvania Certified Public Accountant. Mr. Spadea has over 25 years of tax and estate planning experience. Mr. Spadea graduated from Widener University School of Law, and started the Law Firm Spadea & Associates, LLC in June 2001. The law firm focuses on estate and tax planning, estate administration. Mr. Spadea probates estates and drafts wills, trusts, powers of attorney and health care directives. The firm also helps clients with Medicaid planning, business succession, entity formation and corporate governance issues.

The Accredited Estate Planner® (AEP®) designation is a graduate level, multi-disciplinary specialization in estate planning, obtained in addition to already recognized professional credentials within the various disciplines of estate planning. The AEP® designation is available to actively practicing attorneys (JD) and Certified Public Accountants (CPA); or those currently designated as a Chartered Life Underwriter® (CLU®); Chartered Financial Consultant® (ChFC®); Certified Financial Planner (CFP®); Chartered Financial Analyst (CFA); Certified Private Wealth Advisor® (CPWA®); Chartered Advisor in Philanthropy® (CAP®); Certified Specialist in Planned Giving (CSPG); or Certified Trust & Financial Advisor (CTFA).

It is awarded by the National Association of Estate Planners & Councils to recognize estate planning professionals who meet stringent requirements of experience, knowledge, education, professional reputation, and character. An AEP® designee must embrace the team concept of estate planning and adhere to the NAEPC Code of Ethics, as well as participate in an annual renewal and recertification process.

NAEPC is a national organization of professional estate planners and affiliated local estate planning councils dedicated to the cultivation of excellence in estate planning. NAEPC fosters the multi-disciplinary approach to estate planning by serving estate planning councils and their credentialed members and delivering exceptional resources and unsurpassed education.

For more information or to schedule an appointment with Gregory J. Spadea, Esq., AEP®, please call 610- 521-0604 or email Gregory@SpadeaLawfirm.com.

Filed Under: Estate Planning Tagged With:

Why You Should Never Name Minors as Your Beneficiaries.

September 2, 2021 by Leave a Comment

Most parents want to pass their assets to their children or grandchildren but naming a minor as a
beneficiary can have unintended consequences. It is important to do some estate planning to
avoid leaving assets directly to a minor.

There are two main problems with naming a minor as the beneficiary of your will, life insurance
policy, annuity, IRA or retirement account. The first is that a large sum of money cannot be left
directly to a minor. Instead, a Pennsylvania Orphan’s court will likely have to appoint a
guardian over the estate of the minor to hold and manage the money. Your Estate will have to
pay attorney fees to handle the guardianship proceedings to appoint the guardian, and the
guardian may not be someone you want to oversee your children’s money. The Guardian of the
Estate will have to file annual accountings with the County Orphan’s court, generating more
costs and fees to your Estate.


The other problem with naming a minor as a beneficiary is that the minor will be entitled to the
funds from the Guardian when he or she reaches age 21. There are no limitations on what the
money can be used for, so while you may have wanted the money to go toward college or a
down payment on a house, your child may have other ideas. 


One way to get around these problems is to create a pour over trust in your will and name the
minor as beneficiary of the trust. A trust ensures that the funds are protected by the trustee until
a time when it makes sense to distribute them. Trusts are also flexible in terms of how they are
drafted. The trust can state any number of specifics on who receives property and when,
including allowing you to distribute the funds at a specific age or based on a specific event, such
as graduating from college. You can also spread out distributions over time to children and
grandchildren. 


If you do create a trust, remember to name the trust as beneficiary of all your life insurance, IRA,
annuity or retirement plans. For example if the minor’s name was John Smith, you would have
language that states “In Trust for John Smith under my will dated August 20, 2020, and as the
same which maybe superseded or amended by a later will.”
If you forget to take that step, the money will be distributed directly to the minor when he or she
turns 21, negating the work of creating the pour over trust in your will. If you have any
questions or need help with your estate plan, call Gregory J. Spadea at 610-521-0604.

Filed Under: Estate Planning

Investment and Income Tax Strategies for Individuals

November 3, 2020 by Leave a Comment

2020 Year-end Tax Planning Strategies for Individuals

Now is an ideal time to consider year-end strategies that may benefit you, and plan for 2021.

Results of the election on November 3, 2020 may require a need to revisit this checklist. For example, if you anticipate your marginal income tax rates to increase next year, whether due to increased income or changes to tax legislation, you may want to look to ways to accelerate income and defer deductions.

Offset capital gains

Harvest your losses by selling taxableinvestments.

Harvest your gains by selling taxable investment if you have capital loss carryovers or year-to-date losses for the current year. Short-term losses are most effective at offsetting capital gains. Note: wait at least 31 days before buying back a holding sold for a loss to avoid the IRS wash sale rule.

Evaluate if you should delay purchasing mutual fund shares until 2021 to avoid capital gains on brand new investments.

Defer or reduce income (if you anticipate being in a lower taxable income bracket in 2021 or later)

If possible, defer income and the sale of capital gain property until 2021 or later to postpone taxable income to the following year.

Consider using an RBC Credit Access Line to cover any short-term income distribution gaps.

Bunch your itemized medical expenses in the same year in order to meet the threshold percentage of your adjusted gross income to claim such deductions.

In December, make your January mortgage payment (i.e., the payment due no later than January 15) so you can deduct the interest on your 2020 tax return.

Increase your W-2 federal withholding amount in preparation for a significant tax bill or to avoid the under- withholding tax penalty.

If you have concerns that you may be subject to the Alternative Minimum Tax (AMT), speak with your tax advisor before deferring income or accelerating deductions, as your AMT status could limit your ability to benefit from these actions.

If you feel you will be in a lower income tax bracket in the future and can accept the risk of receiving payments over time, use installment sale agreements to spread out any potential capital gains among future taxable periods.

For 2020 only, consider not taking your RMD if you are in a higher income tax bracket in 2020 than you expect to be in 2021 or future years.

Retirement planning

Maximize your IRA contributions. You may be able to deduct annual contributions of up to $6,000 to your traditional IRA and $6,000 to your spouse’s IRA. If you are 50 or older, take advantage of catching up on IRA contributions and certain qualified retirement plans. You may be able to contribute and deduct an additional $1,000.

Take your Required Minimum Distribution (RMD) if you are age 72 or older.

Consider increasing or maximizing your 401(k) and retirement account contributions.

Consider contributions to a Roth 401(k) plan (if your employer allows and you are in a lower income tax bracket now than you expect to be in the future).

Avoid mandatory tax withholding by making a direct rollover distribution to an eligible retirement plan, including an IRA.

Avoid taking IRA distributions prior to age 59½ or a 10% early withdrawal penalty may apply.

Consider setting up a Roth IRA for each of your childrenwho have earned income.

Consider converting from a traditional IRA to a Roth IRA if in a low marginal income tax bracket. Partial Roth IRA conversions are permissible.

Investment and income tax strategies

Explore taking employer stock from tax-deferred accounts (net unrealized appreciation strategy) to take advantage of capital gains tax rules.

Determine the optimal time to begin taking Social Security benefits, which you can apply for between ages 62 and 70.

If you have been impacted by the COVID-19 pandemic as defined by the IRS, you may be eligible to take a COVID-19- related distribution from an eligible retirement plan. The deadline for taking such a distribution is December 30, 2020, and you may withdraw up to an aggregate limit of $100,000 from all eligible plans and IRAs. You have to pay income tax on the COVID-19-related distribution, but the 10% penalty for withdrawals before age 59 ½ does not apply and the taxes can be paid over three income tax years.

If you have business losses that flow through to your individual tax return in 2020, consider a Roth conversion or harvest capital gains to create income that is offset by the business loss.

Make a Roth IRA contribution if under the applicable earnings limitation  for tax  year  2020. If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $139, 000. If your married filing jointly your MAGI must be under $206,000.

Gifting strategies

Give to loved ones

Consider making gifts of up to $15,000 per person allowed under federal annual gift tax exclusion. Use assets likely to appreciate significantly for optimum income tax savings.

Make sure that your estate plan is up to date, and that you have a will, revocable trust, health care directive and power of attorney in place.

Give to those in need—charity

Make a charitable donation (cash or even old clothes) before the end of the year. Remember to  keep  all  of your receipts from the recipient charity. If the charitable contribution is made very close to year end, consider using a credit card to record that they can be deducted in the current year.

Use appreciated stock rather than cash when contributing to charities. This may help you avoid income tax on the built-in gain in the stock, while at the same time maximizing your charitable deduction.

If you are over 70½ in 2020 and would like to make a donation to charity from your IRA, you can donate up to $100,000 each year directly to qualified charities using a Qualified Charitable Distribution. You avoid taxes through a direct transfer of funds from your IRA custodian to qualified charities. It is a particularly effective way to direct your required minimum distribution.

Set up a donor-advised fund for an immediate income tax deduction and provide immediate and future benefits to charity over time.

Consider “bunching” several years of charitable contributions into one year with a gift to a donor-advised fund to make your contributions more tax-efficient.

Itemize personal residence and mortgage interest*

Up to $250,000 ($500,000 for married couples filing jointly) of the gain from the sale of your principal residence can be excluded from federal income tax, if you lived in the house for 2 of the last 5 years and other requirements are met.

Interest on up to $750,000 of mortgage indebtedness incurred after December 14, 2017, is allowed as an itemized deduction if used to purchase or improve a home.

For mortgages incurred December 14, 2017, or earlier, interest will be deductible on up to $1,000,000 of debt (the old cap), even if refinanced after December 14, 2017.

Set yourself up for success when doing your 2020 taxes

Send capital gains and investment income information to your accountant for a more accurate year-end projection.

Check your Health Savings Account contributions for 2020.If you qualify, you can contribute up to $3,550 (individually) or $7,100 (family), and an additional $1,000 catch-up if you are age 55 or older. Confirm you’ve spent the entire balance in your Flexible Spending Accounts for the year.

Revisit contribution amounts to your 529 plan college savings accounts.

Review Medicare Part D plan to potentially make a change during open enrollment, which begins in October.

Planning for 2021

Discuss major life events with your tax attorney to ensure you have clarity in your current situation and direction for tomorrow. Thisincludes family, job or employment changes and significant elective expenses (real estate purchases, college tuition payments, etc.).

Ensure your account preferences and risk tolerance and investment objectives are up to date with your financialadvisor.

Double check your beneficiary designations (employer- sponsored retirement plans, 401(k)s, IRAs, Roth IRAs, annuities, life insurance policies, deferred compensation plans, etc.), transfer on death (TOD) designations and payable on death (POD) designations. They should be updated as necessary and align with your estate plan.

Review to ensure you have designated a trusted contact person on each of your accounts to help protect your assets against fraud and financial exploitation.

* Interest on mortgage or home equity debt not used to purchase or improve a personal residence is no longer allowable as an itemized deduction.

Filed Under: Estate Planning, Federal Tax, Retirement Plan Distributions, Tax Law

Probating a Pennsylvania Estate

June 5, 2020 by Leave a Comment

Probating estates is also referred to as estate administration which is the process of managing and distributing a person’s probate property after their death.  If the person had a will, the will goes through probate, which is the process by which the deceased person’s property is passed to his or her heirs and beneficiaries (people named in the will).  The entire process usually takes about 18 months. However, distributions from the estate can be made in the interim.

Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor in the deceased family member’s will.  You should meet with an attorney to review the steps necessary to administer the decedent’s estate. Bring as much information as possible about assets, taxes and debts.  Estate administration in Pennsylvania include the following steps:

1. Filing the original will and Death Certificate at the County Register of Wills in order to be appointed executor. You will take an oath, sign the petition and pay a probate fee to get the letters testamentary issued to you appointing you as executor. In the absence of a will, heirs must petition the court to be appointed administrator of the estate and may have to post a bond. 

2.  Giving formal notice to all the beneficiaries named in the will, and then filing a report with the Register of Wills.

3.  Collecting all the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an Inventory with the Register of Wills within nine months of the date of death.  You will also need to open an estate bank account to consolidate all the estate funds. Bills and bequests should be paid from the estate bank account, so that you can keep track of all expenditures.

4. Paying the federal estate tax if applicable and Pennsylvania inheritance taxes. If the estate was over $11,580,000 then a federal estate tax return (form 706) needs to be filed for 2020.  If any assets pass to anyone other than the spouse and children 21 years old and younger, then the executor needs to file a Pennsylvania inheritance tax return.  If you prepay the Pennsylvania Inheritance Tax within three months of the date of the death you receive a 5% discount.  The Pennsylvania inheritance tax return is due nine months after the date of death, but you can apply for a six month extension to file the return. The Pennsylvania Department of Revenue assesses the inheritance tax at a rate of 4 1/2% on linear descendants (children over 21, parents, grandparents and grandchildren), 12% for siblings, and 15% for anyone else.         

 5. Filing final income tax returns. You must also file a final federal and Pennsylvania income tax return for the decedent for the year of death.  If the estate holds any assets and earns over $600 of interest or dividends, or over $600 from sales of property a fiduciary income tax return for the estate will need to also be filed.  

6.  Paying the administrative expenses and all the debts of the estate.  The estate needs to pay for the funeral, probate fees, attorney fees and other administrative expenses first.  The secured creditors are paid next, and then the unsecured creditors are paid with whatever is left. 

If creditors are not paid in the proper order, the executor may be held personally liable for the estate’s debts.        

7. Filing a Disclaimer with the Orphan’s Court within 9 months of the date of death to disclaim any bequests.

8. Distributing property to the heirs and beneficiaries. Generally, executors do not pay out all of the estate assets until after all the known creditors are paid, and the period runs out for other creditors to make claims which is one year after the estate notice is published. 

9. Notifying the Pennsylvania Attorney General for any specific bequests over $25,000 or any bequests paid as percentage of the estate or any charitable bequests that will not be made.  

10. Filing an informal final account. The executor must file an informal final account with all the beneficiaries listing any income to the estate since the date of death and all expenses and estate distributions.  Once the beneficiaries sign a receipt and release approving the informal final account, the executor can distribute whatever is left in the reserve, close the estate bank account and file a status report with the Register of Wills.

If you need help probating an estate please contact Gregory J. Spadea of Law Offices of Spadea & Associates, LLC at 610-521-0604.

Filed Under: Estate Planning, Probate, Probating a Pennsylvania Estate

How To Take The Spousal Elective Share in Pennsylvania If You Are Disinherited

May 18, 2020 by Leave a Comment

It is possible for a spouse intentionally left out of the other spouse’s will to still receive a share of the estate in the event of death. Pennsylvania law provides that if a person is still married at the time of their death with no divorce pending, the surviving spouse can elect to receive 1/3 of that person’s estate. The following property is subject to election:

  1. Property transferred from the decedent by will or intestacy which is when there is no valid will executed by the deceased person;
  2. Income from property of the deceased spouse, which the decedent was entitled to receive during marriage provided that the deceased had the right to the income at the time of death;
Spouses holding hands to show on blog elective care if disinherited
  1. Property that was transferred during decedent’s life that the deceased person still had the right to revoke the transfer and assume the property or invade the principal for his or her own benefit;
  2. Property conveyed by the deceased person during marriage to the decedent and another with a right of survivorship such as jointly owned property;
  3. Annuity payments to the extent that it was purchased during the marriage by the deceased spouse and the decedent was receiving annuity payments at the time of death;
  4. Property or gifts given by the decedent during the marriage within one year of death to the extent that the amount exceeds $3,000 per recipient.

The following property is not subject to election:

  1. Any conveyance or transfer of property made with the express consent of the surviving spouse;
  2. The proceeds of life insurance policies of the decedent;
  3. Interests from any employer established pension, deferred compensation, retirement plans,  profit sharing, etc. for the deceased;
  4. Property passing by the decedent’s exercise or non-exercise of any power of appointment given by a person other than the deceased.

To simplify, a surviving spouse cannot receive any portion of something that they already agreed to give away by way of previously consenting to it. An example would be a pre-nuptial or post-nuptial agreement. As far as it relates to life insurance proceeds and retirement plans or any other accounts that have a beneficiary designation will pass to the named beneficiary.

Additionally, the surviving spouse waives the right to seek other items they may have been entitled to if they choose to exercise the elective share. The surviving spouse must reduce to writing their intent to exercise the elective share and timely file with the Register of Wills within 6 months after the decedent’s death or within 6 months of the date of that the will was probated – whichever date comes later.

If you have any questions or need additional information about the spousal elective share please call Gregory J. Spadea at 610-521-0604.  

Filed Under: Estate Planning, Probate

The Setting Every Community Up for Retirement Act of 2019 (SECURE Act)

February 10, 2020 by Leave a Comment

On December 20, 2019 the President signed into law the Setting Every Community Up for Retirement Act (the SECURE Act) as part of the Further Consolidated Appropriations Act of 2020.   The SECURE Act made various changes to the rules governing retirement benefits.  The key changes are as follows:

Distributions After Death

The most significant changes in the law are that the rules governing required distributions after the death of an employee or IRA owner generally now require that any remaining assets be distributed to the designated beneficiary by the end of the tenth calendar year following the employee or IRA owner’s death. This substantially reduces the benefit of the stretch.

Gold nest egg concept for retirement savings and financial planning

Until now, designated beneficiaries could take distributions over their life expectancy or faster if they wanted. The ability to stretch the distributions over a long period of time provided a substantial income tax benefit.

There are exceptions for spouses, minor children, disabled or chronically ill persons, or persons not more than 10 years younger than the employee or IRA owner.  In addition, withdrawals of up to $5,000 that are used for adoption or childbirth expenses will be exempt for the 10% premature distribution tax for distributions made after 12/31/2019.

These changes are generally effective for persons dying after December 31, 2019.

Traditional IRA Contributions After Age 70 ½

Until now, an individual could not contribute to a traditional IRA if he or she reached age 70 ½ or would reach age 70 ½ by the end of the year for which the contribution is made. Beginning in 2020, this limitation is repealed.

Unlike a traditional IRA, an individual over age 70 ½ is already permitted to contribute to a Roth IRA. However, there are income limits for eligibility to contribute to a Roth IRA. These limits remain in effect.

When Distributions Must Begin

Until now, employees and IRA owners generally had to begin taking distributions at age 70 ½, though they could defer the distribution for the year in which they reach age 70 ½ until April 1 of the following year. However, an employee who is not a 5% owner (with attribution) may defer benefits until retirement; and no distributions are required from a Roth IRA.

The new law increases the age threshold from 70 ½ to 72. This change is effective beginning in 2020 for individuals attaining age 70 ½ after December 31, 2019.

This change benefits some IRA owners who want to do Roth conversions to the extent it will not put them into too high a tax bracket. They will have an additional year or two before they have to take distributions that would be added to their income.

This change also benefits IRA owners who do not need to take distributions from their retirement plans and IRAs. They will be able to accumulate money in their retirement plans and IRAs for a longer period of time.

Planning Considerations

Roth contributions and conversions

It generally makes sense to contribute to a Roth IRA or convert to a Roth IRA to the extent the tax rate on the conversion is less than, equal to, or not too much higher than the tax rate that would otherwise apply to the distributions.

The limitation on the stretch will bunch the distributions after death into a shorter period of time. This generally will result in the distributions being taxable at higher rates.

As a result, Roth contributions and conversions will be much more advantageous than in the past.

Spouses of IRA owners who died within the last nine months

Most married people name their spouse as the primary beneficiary of their retirement benefits. However, under the new law, the surviving spouse’s beneficiaries generally will not be able to stretch the distributions for more than 10 years.

As a result, if an employee or IRA owner died in 2019 within the last nine months, the surviving spouse should consider disclaiming the benefits. In this way, the benefits will pass to the contingent beneficiaries, who may be able to stretch them over their life expectancy under the old law.

Reviewing existing trusts

Many people left their retirement benefits in trust rather than outright for the same reasons they left their other assets in trust rather than outright. By leaving assets in trust, their beneficiaries’ inheritances will not be included in their estates for estate tax purposes and will be better protected against their creditors and Medicaid.

Some people designed their IRA trusts so that any distributions from the IRA to the trust would be paid out to the beneficiary on a current basis. They may have been willing to have the beneficiary receive modest distributions in the early years but may not want the beneficiary to receive the entire amount at the end of 10 years. These trusts should be reviewed, and if appropriate, changed to discretionary trusts.

Charitable remainder trusts

A charitable remainder trust is a possible workaround to replicate the stretch.  A charitable remainder trust distributes a percentage of the trust assets to one or more individuals for life or for a term of up to 20 years, whereupon the trust ends and the balance of the trust assets goes to charity. The distribution percentage must be at least 5%. The client may select the charities.

The payments can be fixed based on the initial value of the trust or may vary based on the value of the trust each year. The actuarial value of the charity’s remainder interest must be at least 10% of the value of the trust as of inception.

Since a charitable remainder trust is tax-exempt except for New Jersey income tax purposes, it can take the benefits in a lump sum without any adverse tax consequences.

Since the individual beneficiaries receive distributions for life or for a fixed term of up to 20 years, the result is similar to that of a stretch.

There are some tradeoffs to a charitable remainder trust. It is less flexible than a traditional trust since the payments may not vary from year to year except based on changes in the value of the trust assets.

The payments to the individual beneficiaries have to be outright. There is an economic cost since the actuarial value of the charity’s interest has to be at least 10% of the value of the trust as of inception. However, for some people, this may be a small price to pay to be able to replicate the stretch.

Increased Penalties for Failure to File Retirement Plan Returns which Applies to Returns, Notices and Statements required to be filed or provided after 12/31/2019

  1. The fee for failure to file form 5500 increased from $25 per day to $250 per day, with the maximum amount per Form increased from $15,000 to $150,000;
  2.  The failure to file form 8955-SSA penalties increased from $1 per day per participant with a maximum penalty of $5,000, and to $10 per day per participant with a maximum penalty up to $50,000;
  3. Notification of withholding of income tax penalties increased from $10 to $100 dollars for each failure, with the maximum being increased from $5,000 to $50,000;
  4. Fees related to failure to report plan name change, name or address change of plan administrator, plan termination or plan merger increased from $1 per day per failure to $10 per day per failure, with the maximum amount being increased from $1,000 to $10,000.

If you have any questions about tax, trust or estate planning call Gregory J. Spadea at 610- 521- 0604.

Filed Under: Estate Planning, IRA Rollovers, IRS Issues

Checklist of What Must be Done After Your Loved One Dies

July 10, 2019 by

Clipboard with checklist

  1. Locate original will, trust, insurance policies and deeds.
  2. Contact both the funeral home and church to make arrangements and publish obituary notice.
  3. Obtain 10 Certified Death Certificates from the Undertaker.
  4. Contact Social Security, the Veterans Administration, and any other payers of pensions to stop direct deposits.
  5. Contact life insurance company to determine death benefits.
  6. Contact utility companies, cable TV, cell phone, pest control and lawn care to cancel service or change billing status.
  7. Contact homeowners, auto and health insurance to cancel coverage or change policy.
  8. Remove your loved one’s name from the car registration if held jointly.
  9. Contact all three credit reporting agencies (Transunion, Experian and Equifax) and cancel all the credit cards in your loved one’s name.
  10. Cancel or change all memberships and magazine or newspaper subscriptions.
  11. Contact an attorney to see if probating the estate is necessary and bring a list of all the assets.
  12. Have the mail forwarded to the executor if needed.
  13. If probating the estate is not necessary, transfer title on all the jointly owned assets such as bank and brokerage accounts to the surviving owner and remove your loved one’s name and social security number. You may leave one joint account open for 8 months after the date of death in case you need to deposit a check in their name.
  14. Update your life insurance policy and retirement accounts to remove your loved one as beneficiary.
  15. If your spouse and yourself own any real property jointly you do not need to change the deeds but you will need their death certificate when the property is sold.

Feel free to contact Gregory J. Spadea, Esquire of Spadea & Associates, LLC online or at 610-521-0604 to help you probate your loved one’s estate.

Filed Under: Estate Planning Tagged With: , , , ,

Understanding the New VA Requirements for Veterans Aid & Attendence Benefits

November 12, 2018 by Leave a Comment

 

The Department of Veterans Affairs (VA) has finalized new rules that establish an asset limit, a look-back period, and asset transfer penalties for veterans applying for VA Aid & Attendance pension benefits. The Veterans Aid and Attendance Benefit pays a monthly pension to low-income veterans or their spouses who are in nursing homes or who need help at home with everyday tasks like eating, bathing, dressing, using the toilet or walking.

Veteran Estate Planning

Currently, to be eligible for Aid and Attendance a veteran or his spouse must meet certain income and asset limits. The asset limits aren’t specified, but the range is $40,000 to $80,000 depending on the age of the veteran. In the past there have been no penalties if an applicant divests himself of assets right before applying. That is, before now you could transfer assets over the VA’s limit to an Intentional Defective Grantor Trust or transfer them to your children before applying for benefits and the transfers would not affect eligibility. The new regulations prevent that by setting a net worth limit of $123,600, which coincidentally is the current maximum amount of assets in 2018 that a Medicaid applicant’s spouse is allowed to retain. But in the case of the VA, this number will include both the applicant’s assets and income. It will be indexed to inflation in the same way that Social Security increases. The good news is an applicant’s house (up to a two-acre lot) will not count as an asset even if the applicant is currently living in a nursing home. Applicants will also be able to deduct medical expenses including payments to assisted living facilities from their income.

The regulations also establish a three-year look-back provision. Applicants will have to disclose all financial transactions they were involved in for three years before applying for VA benefits. Applicants who transferred assets to put themselves below the net worth limit within three years of applying for benefits will be subject to a penalty period which can last as long as five years. This penalty is a period of time during which the person who transferred assets is not eligible for VA benefits. There are exceptions to the penalty period for fraudulent transfers and for transfers to a trust for a child who is unable to support him or herself.
Under the new rules, the VA will determine a penalty period in months by dividing the amount transferred that would have put the applicant over the net worth limit by the maximum annual pension rate (MAPR).

You will need the following information to apply for VA Aid & Attendance Benefits:
• Discharge or Separation Documents (DD 214)
• Form 21-4142: Authorization and Consent to Release Information to the Department of Veterans Affairs
• Physician Statement, VA Form 21-2680 or Nursing Home Statement, VA Form 21-0779
• Medical Expenses incurred, VA Form 21P-8416
• Marriage Certificate and Death Certificate (Surviving Spouses only)
• Asset Information (bank account statements, etc.)
• Verification of Income (social security award letter, pensions, IRAs or annuity statements)
• Proof of Medical Premiums (Insurance Statements, Medication or Medical bills that are not reimbursed by Medicare)

The new rules go into effect on October 18, 2018. The VA will disregard asset transfers made before that date. If you need estate planning assistance please contact Gregory J. Spadea at 610-521-0604. Mr. Spadea has been preparing free wills for Veterans since 2001 to thank them for their service.

Filed Under: Estate Planning

Blog Posts

Purchasing or Selling A Philadelphia Taxicab Medallion

January 13, 2025

The Philadelphia Parking Authority (PPA) requires taxicabs to have a valid certificate and medallion

How a Pennsylvania Family Court Determines Custody

December 29, 2024

How a Pennsylvania Family Court Determines Custody No issue is more important when parents

Links

© 2025 The Law Offices of Spadea & Associates. All Rights Reserved. Sitemap | Disclaimer | Privacy Policy by VPS Marketing Agency, LLC