trickling down funds now to avert Inheritance Tax later - PA

[Bethy]

PA - I am hearing alot about inheritance tax and have a few, probably basic, questions. I am 52, my 2 kids are in their mid 20's and I want to start trickling down some funds - otherwise, I do have my ducks in a row.

What is the maximum amt. I can give each child each year and not have to pay gift tax.

Even though my will says my kids split everything, every account I have has "POD" with their names on it. This includes my ckg. acct., my retirement fund, etc. Will those POD accounts be treated differently than the largest inheritance (my house, worth about 300k) or will they all be subject to 45% (or whatever exact amt. it's going up to) inheritance tax?

thank you

 

[tranquility]

The amount you seek for trickle is not so you don't have to pay tax, but so you don't have to report it. This year, 2013, the amount you can give to a single person without reporting it is $14k. If you give more than that (Single person to single person gift. ), you have to file a gift tax return. Filing the return does not usually result in tax. What it does is add to your lifetime amount available for transfer without taxes. While it is more complex than that, generally, if you die in 2013, the unified amount (The amount you can transfer tax free between lifetime gifts and your estate.) is $5,250,000.

From what you've written, I don't think you have too much to worry about.

 

[anteater]

Tranq was referring to federal gift/estate tax.

For PA Inheritance Tax, there is a one year "lookback" from the date of death for gifts in excess of $3,000 to any one person. Gifts made in excess of the 3,000 within one year of death are subject to the PA Inheritance Tax.

As long as you are the owner of the POD accounts at death, they are subject to the PA Inheritance Tax.

The PA Inheritance Tax rate for assets transferring to lineal descendants is currently 4.5%.

 

[tranquility]

Oops, I shouldn't have missed that. I guess it just comes from practicing in a low-tax state like California.

 

[anteater]

Oops, I shouldn't have missed that. I guess it just comes from practicing in a low-tax state like California.

No oops needed. It wasn't completely clear whether it was the Feds or the State Revenooers that the OP was referring to. The reference to a 45% rate really induces doubt. Maybe there was a decimal point missing.

And, by the way, PA does not have gift reporting or a gift tax.

 

[TrustUser]

you mean there is a state where you pay more than california ????

with all the liberal laws, they find a million and one ways to tax us !!!

and they are still broke from overspending !!!