How to File Pennsylvania Inheritance Tax

Preparing a tax return

When a resident of Pennsylvania bequeaths his assets to family members or other individuals, the vast majority of these assets will be subject to the state's inheritance tax. While life insurance payments, pensions and individual retirement accounts (which haven't reached maturity yet) are exempt, assets are taxed based on how the beneficiary is related to the deceased. An individual is allowed a complete inheritance tax exemption for only one spouse during his or her lifetime. If a widow claims the exemption and then re-marries, she will have to pay taxes on any bequests from her second husband. Direct descendants (children, step-children, parents and grandchildren) must pay a 4.5 percent tax rate. Siblings (including biological and adoptive) must pay a 12 percent tax rate while nephews, nieces and unrelated beneficiaries are subject to the maximum 15 percent rate.

Prepared by the executor of the deceased's estate, the Pennsylvania Inheritance Tax Return is an extensive document but online resources have made the process easier than ever before.

Things You'll Need

• Adobe Acrobat 9.1 or above
• Notarized copies of probate, will or trust disclaimers
• Completed federal estate tax return (Form 706)
• 8.5- by 11-inch manila envelope

Instructions

1. Visit the Forms & Publications section on the Pennsylvania Department of Revenue's website. See Resources for a direct link.

2. Click on the link titled "rev-1502_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule A" page, which covers real estate assets. Record all of these bequeathed assets on this PDF and save the completed file to your computer.

3. Click on the link titled "rev-1503_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule B" page, which covers stocks and bonds. Record all of these bequeathed assets on this PDF and save the completed file to your computer.

4. Click on the link titled "rev-1504_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule C" page, which covers corporation ownerships and other business interests. Record all of these bequeathed assets on this PDF and save the completed file to your computer.

5. Click on the link titled "rev-1507_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule D" page, which covers mortgages and promissory notes (IOUs). Record all of these bequeathed assets on this PDF and save the completed file to your computer.

6. Click on the link titled "rev-1508_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule E" page, which covers cash, bank deposits and highly liquid personal property like clothes, vehicles, livestock, timeshares, boats, farm machinery, books, paintings and furniture. Record all of these bequeathed assets on this PDF and save the completed file to your computer.

7. Click on the link titled "rev-1509_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule F" page, which covers jointly owned property. Record all of these bequeathed assets on this PDF and save the completed file to your computer.

8. Click on the link titled "rev-1510.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule G" page, which covers IRAs, annuities and gifts given within one year prior to the benefactor's death. Record all of these bequeathed assets on this PDF and save the completed file to your computer.

9. Click on the link titled "rev-1511.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule H" page, which covers funeral expenses and administrative fees involved with filing the inheritance tax return and setting up the deceased's estate. Record all of these costs on this PDF and save the completed file to your computer.

10. Click on the link titled "rev-1512_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule I" page, which the deceased's debts, mortgage liabilities and liens at his time of death. Record all of these liabilities on this PDF and save the completed file to your computer.

11. Click on the link titled "rev-1513_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule J" page, which covers beneficiaries. Record the names, addresses and phone numbers of all the beneficiaries on this PDF and save the completed file to your computer.

12. Click on the link titled "rev-1514_fillin.pdf" to open a fill-in PDF of the inheritance tax return's "Schedule K" page, which covers life estates and terms certain for the deceased. Record all of this information on the PDF and save the completed file to your computer.

13. Determine if part of the inheritance consists of an estate of someone who died on or before Dec. 12, 1982. If so, click on the links titled "rev-1644.pdf," "rev-1645.pdf" and "rev-1646.pdf" to open the fill-in PDF for the inheritance tax return's "Schedule L," "Schedule L-1" and "Schedule L-2" pages. These forms cover the estates in which payment schedule is altered by the death of the return's benefactor. For example, if a man who died in 1981 set up his estate as an annuity, he could stipulate that his young wife would receive annual payments until her death, whereupon the annual payments would go to their then-infant son. When filing the inheritance tax return for the wife's death in 2008, the executor of her estate would need to fill out Schedules L, L-1 and L-2. Record all of this information on the PDFs and save the completed files to your computer.

14. Look to see if part of the inheritance consists of an estate of someone who died after Dec. 12, 1982, but before Jan. 1, 1995. If so, click on the link titled "rev-1647_fillin.pdf" to open the fill-in PDF for the inheritance tax return's "Schedule M" page. This section is basically a version of Schedule L, modified for the different date of death. Record all of the required information on the PDF and save the completed file to your computer.

15. Determine if one of the beneficiaries is the surviving spouse who already claimed the one-time inheritance tax spousal exemption on the inheritance from an earlier marriage. If so, click on the link titled "rev-1649_fillin.pdf" to open the fill-in PDF for the inheritance tax return's "Schedule O" page. This section allows the surviving spouse to defer the payment of the tax until after her own death. Record all of the required information on the PDF and save the completed file to your computer.

16. Click on the link titled "rev-1500_fillin.pdf" to open a fill-in PDF of the inheritance tax return's cover sheet. Record all of the required information on the PDF and save the completed file to your computer.

17. Obtain written copies of any probate, will or trust disclaimers, wherein a beneficiary explicitly refuses part or all of an inheritance.

18. Print out hard copies of all of the Schedule forms you completed, including the cover sheet.

19. Fill an 8.5- by 11-inch manila envelope with the documents from Steps 17 and 18, along with a copy of the deceased's completed Federal Estate Tax Return (Form 706).

20. Deliver the envelope from Step 19 to the Register of Wills Office for the deceased's home county.

References

• State of Pennsylvania: Guide to Preparing the PA Inheritance Tax Return

Resources

• Pennsylvania: Forms & Publications for the PA Inheritance Tax