Skip to Content

We are a Veteran Owned Business, providing 20% discounts for Veterans, First Responders, Elementary and High School teachers. We remain open during the shutdown period, so please contact us to set up a phone or Zoom meeting. Taking care of you and your family, It's What We Do!

Klenk Law

Is my IRA subject to the Pennsylvania Inheritance Tax?

Posted on Tue Nov 11, 2014, on Estate Planning

From our “Ask a Question” Mailbag: PA Inheritance Tax and the IRA

Most Recently Updated July 7, 2018

“Is my IRA subject to the PA Inheritance Tax?”

Probate-Fees

PA Inheritance Tax and the IRA

PA Inheritance Tax and the IRA – What You Should Know

Your IRA is subject to the Pennsylvania Inheritance Tax, which can prove to be a tax trap.

For example, if you leave $100,000 from your IRA to a friend, that gift is subject to the 15% Pennsylvania Inheritance Tax rate. To avoid interest and penalties on the Pennsylvania Inheritance Tax, within 9 months of your death your friend must pay the Commonwealth $15,000. If your friend does not have $15,000 of liquid assets, she may have to remove the $15,000 from the IRA. If she does, this will trigger her to recognize $15,000 of income. If she does not have the liquid assets to pay the income taxes due on the $15,000, she may have to remove the money from the IRA, which triggers even more income taxes.

You can see, your friend might end up quickly liquidating the entire IRA to pay the Inheritance and Income taxes due.

A good Estate Planning Attorney will work with you to help prevent this tax spiral.

For example, life insurance is not subject to the Pennsylvania Inheritance Tax, making it an excellent tool to make gifts to those who would otherwise be subject to the tax. If you leave the same friend $100,000 in life insurance there is no Pennsylvania Inheritance tax or income tax due. Your friend is free to enjoy the entire $100,000.
Estate planning can help move money out of the Commonwealth and IRA’s pocket and into the pockets of your heirs.

More Planning Questions?

The PA Inheritance Tax and the IRA is only a piece of the Estate Planning process. By all means, if you want to learn more, please read my more detailed article, Estate Planning Everything You Need to Know.

In Conclusion: PA Inheritance Tax and the IRA

I hope that this article was helpful in explaining how the PA Inheritance Tax effects your IRA. Further, I included links to even more detailed information on my website so you can learn more. Therefore, please contact me and let me know how I did. Certainly, your comments and questions are welcome!

Let our Estate Planning lawyers help walk you through what can be a confusing process. To begin with, call to speak to one of our experienced estate planning lawyers.  By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to make the process as painless as possible!

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

 

Tags:

Estate Planning, Estate Planning Attorney, Estate Planning Lawyer, Inheritance Tax, IRA Trust, Pennsylvania, Philadelphia

What Our clients are saying

Klenk Law Logo
Stars

Peter has done a great job with the estate planning for my father. He is very thorough and patient as we, the family need to make decisions.

Klenk Law Logo
Stars

Like another reviewer, I contacted Peter through his website using the free consultation link, for a question regarding PA inheritance taxes. The question was quite technical and difficult to explain, and the answer was nowhere to be found on the web. Peter grasped precisely what I was asking, and provided a clear, helpful response (with a touch of humor) the very next day.

Klenk Law Logo
Stars

I was referred to Peter after my divorce to put documents together to protect my assets. He suggested a number of documents that would help protect my children and their future. Also, he put together wills, power of attorney and living wills. I initially spoke with him on the phone, he took 30-40 minutes to understand my situation and explain the benefits of having such documents. After a week or two, I met with him in his office and signed the documents. Everything else was remote phone calls and emails. He re-explained these documents and what whom to share. I am in good hands.

Klenk Law Logo
Stars

Peter explained a complex subject very clearly, helped us to decide the best approach to managing our estate and then made it very easy for us to execute the required documents. He will be a valuable resource for years to come and clearly has a great understanding of estate law that will lead to innovative solutions for us. I would unhesitatingly recommend him for estate planning.

Klenk Law Logo
Stars

Peter came highly recommended by a close friend to do our estate planning. We have been putting off for years. He is knowledgeable, professional and easy to work with.

Let us put our expertise to work for you.

Free consultation within 24 hours.