philadelphia-pa-estate-inheritance-taxation-lawyers

John B. Whalen, Jr., JD., LL.M., is an AV Peer Review Rated Preeminent 5.0 and Avvo Rated 10.0 Superb. He has obtained over 95 client reviews and peer endorsements premier and prestigious Attorney and Counselor at Law.

Mr. Whalen is featured on AV Peer Review Rated Preeminent 5.0Avvo Rated 10.0 SuperbAvvoJustiaLawyersMartindaleNoloQuora, and Thumbtack.

John is located at 118 Westdale Road, Upper Darby, Pa. 19082. He serves all surrounding counties, on all 7 days, from 9:00 AM to 10:00 PM. His office is open on all evenings, weekends, and holidays.

Mr. Whalen provides free initial consults all seven days, provides home visits, and provides flat fee structures. He can be reached by email at jw60297@me.com, and by telephone at 1-610-999-2157.

John has amassed over 60 prestigious and premier professional awards and over 5000 client reviews and endorsements. Mr. Whalen has achieved the AV Peer Review Rated Preeminent award from Martindale. He has received the AV Peer Judicial Preeminent award. He has received the Avvo Rated Superb 10.00 award, and the Avvo Rated Top Lawyer award. He has also received the Clients’ Choice Award, and the Top One Percent (1%) award.

He is the recipient of the Legum Magister Post-Doctorate Degree (LL.M.) in Taxation (from the Villanova University School of Law). He is the recipient of the American Jurisprudence Award in Wills, Trusts, and Estates (from the Widener University School of Law).

He is also the recipient of the ABA-BNA Law Award for Academic Excellence (from the Widener University School of Law).

Philadelphia Pa Inheritance Taxes – Intro

When an individual acts in a fiduciary capacity such as a Pa Executor of a Pa Last Will or a Pa Trustee of the financial assets of another person or entity, they have the responsibility of keeping accurate financial records.

Those records should show how money was spent, invested, and/or distributed while under the fiduciary’s care and control. Proper accounting can bring to light the mismanagement or bad investment of funds should an issue arise with an interested party.

Philadelphia Pa Inheritance Taxes – Interests Served

There can be a number of interested parties who may want to examine the financial records and approved fiduciary accountings. They are entitled to receive copies of all the materials such as profit and loss statements, expense reports and tax returns. You may request documentation if you are:

  • a beneficiary of an estate or trust
  • a principal of an agent acting on your behalf
  • a minor whose care is being administered through a third party fiduciary agent
  • the court who must evaluate financial matters in relation to a trust or estate

Philadelphia Pa Inheritance Taxes – Approved Fiduciary Accountings

Certain procedures must be followed when reports are prepared to explain how the assets in an estate or trust were managed. Approved fiduciary accountings require the separation of principal and interest. You can not commingle funds that are considered principal with those that are considered income.

  • Principal = original investment + capital gains – capital losses – expenses – distributions
  • Income = money generated from the investment or use of principal

The main reason for keeping principal and income in separate accounts is that the beneficiaries of income in a trust or estate may be different than the beneficiaries of the principal in the same estate or trust.

Philadelphia Pa Inheritance Taxes – Fiduciary Tax Returns – Form 1041

A trust or an estate is considered a separate legal entity from an individual who may be a beneficiary of that trust or estate. Therefore, it is incumbent upon the fiduciary administering the estate or trust to file a federal tax return under certain conditions.

The IRS requires a trust to file a tax return if it has any taxable income or has gross income of at least $600, regardless of whether it is taxable or not. Estates must file Form 1041 if they have gross income of $600 or more. A fiduciary must also file a return if any of the beneficiaries of the estate or trust is a non-resident alien.

Form 1041 is similar to the 1040 return used by individuals. The form is designed so estates and trusts can report income, deductions, gains, losses and any other pertinent financial information. Before funds or assets can be distributed, any tax liabilities of the estate or trust must be satisfied.

Philadelphia Pa Inheritance Taxes – Closing Out a Fiduciary Relationship

Once all of the assets of an estate or trust have been distributed or otherwise settled, it is customary that the fiduciary is released from further responsibility. That may be done by signing a release form through the court or an agreement with the beneficiaries of the estate or trust.

Dealing with estate taxation can be complex. Estate taxation attorney John B. Whalen, Jr., provides guidance to his clients when dealing with these complicated issues.

Philadelphia Pa Inheritance Taxes – Intro

When an individual acts in a fiduciary capacity such as a Pa Executor of a Pa Last Will or a Pa Trustee of the financial assets of another person or entity, they have the responsibility of keeping accurate financial records.

Those records should show how money was spent, invested or distributed while under the fiduciary’s care and control. Proper accounting can bring to light the mismanagement or bad investment of funds should an issue arise with an interested party.

Philadelphia Pa Estate Taxation Lawyers – Interests Served
There can be a number of interested parties who may want to examine the financial records and approved fiduciary accountings. They are entitled to receive copies of all the materials such as profit and loss statements, expense reports and tax returns. You may request documentation if you are:

a beneficiary of an estate or trust
a principal of an agent acting on your behalf
a minor whose care is being administered through a third party fiduciary agent
the court who must evaluate financial matters in relation to a trust or estate
Philadelphia Pa Approved Fiduciary Accountings
Certain procedures must be followed when reports are prepared to explain how the assets in an estate or trust were managed. Approved fiduciary accountings require the separation of principal and interest. You can not commingle funds that are considered principal with those that are considered income.

Principal = original investment + capital gains – capital losses – expenses – distributions
Income = money generated from the investment or use of principal
The main reason for keeping principal and income in separate accounts is that the beneficiaries of income in a trust or estate may be different than the beneficiaries of the principal in the same estate or trust.

Fiduciary Tax Returns – Form 1041
A trust or an estate is considered a separate legal entity from an individual who may be a beneficiary of that trust or estate. Therefore, it is incumbent upon the fiduciary administering the estate or trust to file a federal tax return under certain conditions.

The IRS requires a trust to file a tax return if it has any taxable income or has gross income of at least $600, regardless of whether it is taxable or not. Estates must file Form 1041 if they have gross income of $600 or more. A fiduciary must also file a return if any of the beneficiaries of the estate or trust is a non-resident alien.

Form 1041 is similar to the 1040 return used by individuals. The form is designed so estates and trusts can report income, deductions, gains, losses and any other pertinent financial information. Before funds or assets can be distributed, any tax liabilities of the estate or trust must be satisfied.

Closing Out a Fiduciary Relationship
Once all of the assets of an estate or trust have been distributed or otherwise settled, it is customary that the fiduciary is released from further responsibility. That may be done by signing a release form through the court or an agreement with the beneficiaries of the estate or trust.

Dealing with estate taxation can be complex. Estate taxation attorney John B. Whalen, Jr., provides guidance to his clients when dealing with these complicated issues.

Philadelphia Pa Inheritance Taxes – Notes

A major area of misinformation and misunderstandings in the estate law and estate planning areas are the taxes that are imposed upon one’s death in Pennsylvania.

Very simply, two death taxes can be imposed on the death of Pennsylvania residents – the:

  • Federal Estate Tax
  • Pennsylvania Inheritance Tax

However, and unlike the income tax, which is very descriptive in its title as it is imposed upon your income, the phrases Estate Tax and Inheritance Tax are misnomers in that may tend to belie the actual fact that these are taxes imposed by virtue of your death.

Philadelphia Pa Inheritance Taxes – Federal Estate Tax

Historically, the Federal Estate Tax has begun at a wealth threshold.  If you possess less than the wealth threshold at your death, the federal estate tax will not be applicable.

If it is applicable, the tax is imposed on a percentage scale according to the amount of your wealth (i.e., potentially 47% of the value of your assets above the wealth threshold).

The current wealth threshold of the Federal Estate Tax has been changing drastically throughout the last decade. It has increased, disappeared, and reappeared in 2011.

In 2005, the threshold was $1,500,000.00; in 2006, 2007, and 2008, the threshold was $2,000,000.00; in 2009, the threshold was $3,500,000.00; and in 2010, the Federal Estate Tax was scheduled to be, and in fact was, eliminated.

However, and although the Federal Estate Tax was scheduled to return with a wealth threshold of just $1,000,000.00, in 2011, it did not. The Internal Revenue Service changed that law and “announced the 2015 estate and gift tax limits […] and the federal estate tax exemption rises to $5.43 million per person, and the annual gift exclusion amount stays at $14,000.” “IRS Announces 2015 Estate And Gift Tax Limits”

The federal estate tax exemption—that’s the amount an individual can leave to heirs without having to pay federal estate tax—will be $5.43 million in 2015, up from $5.34 million for 2014. That’s another $90,000 that can be passed on tax-free. The top federal estate tax rate is 40%.

Philadelphia Pa Inheritance Taxes – PA Inheritance Tax

The Pennsylvania Inheritance Tax has no wealth threshold and starts immediately. It is imposed on a percentage based on the relationship of the beneficiary. Spouses and Charities are taxed at a 00.00% tax rate, lineal descendants are taxed at a 04.50% tax rate, brothers and sisters (but not brothers-in-law nor sisters-in-law) are taxed at a 12.00% tax rate, and everyone else is taxed at a 15.00% tax rate.

Be aware that Wills and Probate are extremely tax intensive.

It will begin with Estate Planning
It will continue with the Will’s vital tax clause
It will impact the client’s Asset Titles
It will extend through Probate
It will impact the beneficiaries tax obligations
It may resolve through the Estate Administration
It can extend far beyond the Estate’s conclusion

Extremely likely is the fact that the tax returns required in Pa are

The Pa Inheritance Tax Return
The Federal Estate Tax Return (depending)
The Decedent’s final Federal Income Tax Return
The Decedent’s final Pennsylvania Income Tax Return
The Estate’s Federal Fiduciary Income Tax Return(s)
The Estate’s Pennsylvania Income Tax Return(s)

The Philadelphia PA Inheritance tax is imposed as a percentage of the value of a decedent’s estate transferred to beneficiaries by will, heirs by intestacy and transferees by operation of law.

The tax rate varies depending on the relationship of the heir to the decedent.

The Pennsylvania inheritance tax taxes assets owned by the decedent at the time of his or her death. Unlike the federal estate tax, there is no minimum dollar amount for the estate to be taxed; all estates of any value are subject to taxation. The inheritance tax return is due within nine months of the death of the decedent.

Philadelphia Pa Inheritance Taxes – Rates

Inheritance tax is imposed as a percentage of the value of a decedent’s estate transferred to beneficiaries by will, heirs by intestacy and transferees by operation of law.

The tax rate varies depending on the relationship of the heir to the decedent. The rates for Pennsylvania inheritance tax are as follows: The rates for Pennsylvania inheritance tax are as follows:

  • 00.00 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger;
  • 04.50 percent on transfers to direct descendants and lineal heirs;
  • 12.00 percent on transfers to siblings; and
  • 15.00 percent on transfers to others

(heirs, except charitable organizations, exempt institutions and government entities exempt from tax)

Philadelphia Pa Inheritance Taxes – Due

Inheritance tax payments are due nine (9) months after the individual’s death. If it is paid within three (3) months of the decedent’s death, a 5 percent discount is granted to the Estate. If it is not paid within that period of time, the Pennsylvania Department of Revenue may assess penalties and interest.

Philadelphia Pa Inheritance Taxes – Basis

The Pennsylvania inheritance tax is a tax on property at the time of someone’s death and is imposed upon the transfer of that property.

From the value of these resources, we are permitted to deduct certain expenses to arrive at a net valuation for the estate. These expenses include:

  • the cost of the funeral,
  • the debts of the decedent (including mortgage loans, credit cards, home equity loans, etc.),
  • the expenses of the last illness,
  • all fees that are paid to the Register of Wills Office; and
  • the legal fees for processing the estate, and miscellaneous expenses and fees.

Once the net value has been calculated, the Pennsylvania inheritance tax is applied as follows:

  • 04.50 % of that net value to children,
  • 12.00 % passing siblings, and
  • 15.00 % to other individuals would be taxed in Pennsylvania at a rate of 15%.

Many people do not realize that there are certain types of assets that are exempt from the Pa Inheritance Tax.

  • life insurance proceeds which are paid directly to a beneficiary or are paid to the estate of the decedent are exempt.
  • an IRA account held in the decedent’s name, if the decedent had not reached the age of 59 ½, is also exempt.

Sometimes, jointly held property is ignored for tax purposes at the time of death. For example, where a decedent owns a bank account which is titled in the decedent’s name and, let us say, two of his children’s names, the decedent’s one-third interest would be taxed at a rate of 4.5%.

However, if that account was established using only the decedent’s funds, and the decedent dies within one year, then the whole value of the account is taxed, not just a portion of it.

If payment is made within 90 days of the date of death, the department discounts the amount by 5%.

Philadelphia Pa Inheritance Taxes – Related Posts

John B. Whalen, Jr., JD., LL.M., is an AV Peer Review Rated Preeminent 5.0 and Avvo Rated 10.0 Superb. He has obtained over 95 client reviews and peer endorsements premier and prestigious Attorney and Counselor at Law.

Mr. Whalen is featured on AV Peer Review Rated Preeminent 5.0Avvo Rated 10.0 SuperbAvvoJustiaLawyersMartindaleNoloQuora, and Thumbtack.

John is located at 696 Pont Reading Road Ardmore Pa 19003. He serves all surrounding counties, on all 7 days, from 9:00 AM to 10:00 PM. His office is open on all evenings, weekends, and holidays.

Mr. Whalen provides free initial consults all seven days, provides home visits, and provides flat fee structures. He can be reached by email at jw60297@me.com, and by telephone at 1-610-999-2157.

John has amassed over 60 prestigious and premier professional awards and over 5000 client reviews and endorsements. Mr. Whalen has achieved the AV Peer Review Rated Preeminent award from Martindale. He has received the AV Peer Judicial Preeminent award. He has received the Avvo Rated Superb 10.00 award, and the Avvo Rated Top Lawyer award. He has also received the Clients’ Choice Award, and the Top One Percent (1%) award.

He is the recipient of the Legum Magister Post-Doctorate Degree (LL.M.) in Taxation (from the Villanova University School of Law). He is the recipient of the American Jurisprudence Award in Wills, Trusts, and Estates (from the Widener University School of Law).

He is also the recipient of the ABA-BNA Law Award for Academic Excellence (from the Widener University School of Law).

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