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Estate Planning 101

When it comes to estate planning, many individuals are intimidated by the seeming complexity of the subject. Here are a few pieces of information that may simplify the process for you.

Federal Estate Tax

As a starting point, you should be aware that any assets that are either titled jointly with your spouse, or are left by Will to your spouse, will pass free of any federal or state inheritance tax.

Any assets that are titled jointly with your spouse will pass by what is known as “operation of law,” and there will be no need to involve the probate process in order for the surviving spouse to receive them.

One potential problem with leaving the entirety of your estate outright to your spouse can be that your children will not be guaranteed to receive a portion of your estate. It is for this reason that many individuals consider the creation of a trust, in which their spouse could receive the income from monies they leave upon their passing for their life, with the balance to be divided among their children.

Tax Planning and Planning for Inheritance Taxes

For many clients, limiting tax obligations at the time of death is an important aspect of estate planning.  Depending on the size of the estate and the specific estate plan you use, your estate tax amount will vary.  Our attorneys are experienced in strategic planning to reduce or eliminate death taxes on your estate. Remembering that any funds that you leave to your spouse outright will not be taxable, the Federal Tax Reform Act has now greatly enhanced the amount of money required to be left in an estate before there will be federal tax consequences.

As of 2023 that individual limit is in the amount of $12.92 million dollars. What that means is the first $12.92 million dollars of your estate not passing to your spouse would be exempted from federal taxes. Additionally, the concept of portability was likewise introduced. What that means is if a husband dies first and does not utilize any of his $12.92 million dollar exemption in his lifetime through gifting then $25.84 million dollars would be available to a surviving wife before any federal tax consequences could take effect. Obviously, this places most estates outside the range of federal taxation rates which are still in the exorbitant 40 % or above bracket. Additionally, the gift tax exemption has been increased so that each individual now has a lifetime exemption of $12.92 million dollars per person.

From a fundamental standpoint, this means that you can gift up to $12.92 million dollars of your estate when you are living and there will be no federal tax consequences.

Additionally, many individuals are familiar with the concept of the availability of gifting $17,000.00 per person per year without it impacting the above described $12.92 million dollar unified credit. After that, the gifting allowance remains in force.

In 2025 this rather high level of tax exemption will revert back to $5.49 million dollars per person or roughly $11 million dollars per couple. This has been an area of significant scrutiny among Congress and the presidential administration. We will keep a close eye on this, and advise our clients if that unified credit limit size is reduced, or remains the same.

Individuals should be aware that included in their federal estate are any cash, stocks, bonds, retirement or 401k plan proceeds, annuities and most importantly, life insurance proceeds.

Pennsylvania Inheritance Tax

The tax rates imposed by the Commonwealth of Pennsylvania are far below those of the federal rates, but planning considerations are of importance for estates below the federal limit.

Once again, any assets passing between a husband and wife will be exempt from Pennsylvania inheritance tax imposition.

The State imposes tax on bequests to children at the rate of 4.5% of the net estate, 12% for other family relatives, and 15% for other individuals to whom bequests are made. An exception to this tax would be funds left to charity, for which there is no Pennsylvania or, for that matter, federal tax imposed. Pennsylvania has no exemption amount, so that estates of any size left to a non-spouse will be responsible for payment of state inheritance tax.

Pennsylvania has an additional distinguishing feature, in that life insurance proceeds are not considered a part of an individual’s estate for purposes of taxation.

Finally, only assets that are held within the Commonwealth of Pennsylvania are taxed at this rate, so that, for instance, if an individual owns real estate outside of Pennsylvania, it would not be included in his Pennsylvania Inheritance Tax Return.


Very briefly, probate is the process by which a Will is formally admitted into the Pennsylvania inheritance tax system. This allows the executor of the estate to act on its behalf through the issuance of letters testamentary, commonly referred to as “Short Certificates.” Individuals should be aware that both federal and state tax obligations must be completed within nine months from the date of an individual’s death.

It is for this reason that acting on the admission of a Will into probate within a reasonable period of time following an individual’s death is important.

Estate planning and estate administration can be a complicated process, and if you have questions, please contact us with your specific questions.