Taxation is an important consideration in both estate planning and the administration of decedent's estates. There are sophisticated tools available to blunt the impact of the Federal Estate Tax in the event a person's estate value exceeds $5,350,000.00. For individuals with very large estates, lifetime planning can lessen the impact of that tax. For married couples, proper planning will ensure that each spouse may use the full exemption amount. If an estate becomes subject to the Federal Estate Tax, the tax rate is 40%. There is no Federal Estate Tax on property passing to a surviving spouse.
In Pennsylvania we have the Pennsylvania Inheritance Tax. The state taxes the net estate, total assets less expenses, at the rate of 4.5% for children and grandchildren, 12% for brothers and sisters and 15% for anyone else. There is no tax on assets left to the surviving spouse.
The Executor must file the final Income Tax Returns of the decedent. In addition, Income Tax Returns must be filed for the Estate itself or any Trusts established during lifetime or in the Will. There are important income tax-related capital gains considerations during the administration of an Estate.