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Question for the Money Doctors

Question submitted on Jun 20, 2011.

Question

does my deceased mother have to pay any pennsylvania inherentance tax for certificates of deposits held jointly in her and my name where I am her son?



Answer

Pennsylvania imposes an inheritance tax based on the value on the date of death of a decedent''s taxable assets less the amount of allowable deductions. For PA inheritance tax purposes, there is no "limit" regarding the size of an estate. As long as taxable assets exist, or it''s necessary to probate a Will or secure Letters of Administration, then an inheritance tax return must be filed.
The tax rate is determined by the relationship of the beneficiaries to the decedent and can be 0%(spouse); 4.5% (lineal heirs - children, grandchildren, etc.); 12% (siblings - brother/sister) or 15% (collateral heirs - everyone else!), so in your case, not knowing the amount of her estate, if any portion of the estate is considered to be taxable assets then you would be pay 4.5% of the amount as inheritance tax.

The fact that the CDs were held jointly does not change the inheritance tax.  Jointly-owned property with right of survivorship, except between husband and wife, including but not limited to real estate, securities, bank accounts, etc., is taxable to the extent of your mother's fractional interest in the joint property.  Assuming you and her were the only 2 joint owners at the time of her passing, half of the value of the CDs would be considered her fractional interest in the joint property.  Joint property in PA is taxable even if your mother's name was added as a matter of convenience.  Further, if your mother created the joint interest in the property within a year of her passing, the full value of the property is taxable in the decedent's estate.

I recommend you work with a professional familiar with PA inheritance tax so you can provide the full details of the estate.  That way you can make sure any deductions are taken on the inheritance tax return in order to minimize the tax and that the proper filings are prepared on a timely basis.


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