Inheritance Tax (Estate)

[ivanl3]

What is the name of your state? Pennsylvania

My wife is the admistatrix to her son's estate. Her son died 5 years ago. The appropriate announcements regarding the estate were made 4 years ago. No claims were filed against the estate. Currently there are no funds in the estate. About $150K will be there soon due to a settlment of a wrongful death suit. Eventaully these funds will be distributed in part to her ex-husband, her son, and herself. My understanding is that no federal inheritance tax will be owed by anyone b/c the amount is so low. The state of PA, however, will take 15% of her ex-husband's share, 15% of her share and 12% of her son's share, correct? Also, as aministratrix, my wife will also receive some money for these duties separate from her share as an heir. Will she owe tax on these funds? If so, how much and to whom (state or federal).

Thanks.

 

[ivanl3]

I know see that the rate for my wife and her ex-husband is actually 4.5%, not 15%. What I am still confused about though is if any of it is taxable at all given that the money made its way into the estate after a lawsuit was filed (and settled) after her son died. Thanks in advance for the clarification.

I also now see that any funds she received as administratrix is taxable as income tax (even worse!!!), correct?

 

[anteater]

From the instructions for Form 1500, Schedule E:

This schedule should be used to report the proceeds received by
an estate representative for any personal injury claim instituted
by the decedent prior to the decedent’s date of death. Also, report
any proceeds received from a settlement of a wrongful
death/survival action claim instituted and paid to the estate representative
after the decedent’s date of death. In all cases, a copy
of the petition to the court for the approval of the settlement
and/or allocation and a copy of the signed court order and the
date the monies were received by the estate should be attached.
All personal injury claims instituted prior to the decedent’s date
of death and funds allocated to the survival action as part of a
wrongful death/survival action claim are subject to Pennsylvania
inheritance tax.

Yes, the PR fee is taxable income. (Although, something in the back of mind says that it is not subject to PA income tax. Not positive on that.) You and wife need to take keyboard to spreadsheet to determine whether she is better off taking the fee, with it being taxed as income, and 50% of the estate with a 4.5% inheritance tax. Or forego the fee and just receive 50% of the estate with the 4.5% inheritance tax.

 

[LdiJ]

Was the wrongful death suit due to her son's death? If so, why would that money be going into his estate?