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Do you need to plan for estate taxes after your death?

On Behalf of | Aug 31, 2019 | Firm News

Putting together a nicely crafted estate plan in Pennsylvania may make you feel like you have everything in order. It can give you a peace of mind that you have taken care of your loved ones even after you are no longer here to watch out for them. You may feel as if there is nothing that could go wrong.

While that may be true, there is one thing that you may not have accounted for in your estate plan. If there is one thing that even death cannot stop, it is taxes. There are different types of taxes that the government at the state and federal levels can levy against your estate.

Smart Asset explains that the state does not have an estate tax, but there are other taxes your heirs may have to pay out of your estate. You can plan ahead to pay these taxes so the burden does not fall on your heirs, but first, you have to know what they are.

Inheritance tax

The state has an inheritance tax that it levies against some inheritances. Your spouse will not have to pay this tax and neither will any children of yours who are under the age of 21, but other heirs may have to pay. If you leave assets to your grandchildren or older children, they can expect to pay the tax. The state also taxes siblings. The percentage of the tax they will pay depends on their relationship to you. Your sister, for example, would pay a higher tax rate than your adult child.

Gift tax

The state does not have a gift tax, but the federal government does. Your heirs will have to pay this tax on certain inheritances of a certain value. The value changes each year, so be sure to stay on top of this tax to know how much they will have to pay.

Planning ahead for taxes can really help your loved ones out when you die. They are already going to be upset over your death and should not have to worry about paying taxes.