Pennsylvania Inheritance Tax Trap

Pennsylvania Inheritance Tax Trap

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Estate Planning Practitioners and clients should be aware that there is an inheritance tax trap in Pennsylvania. In most states, it is common to set aside a certain amount for the spouse and the children in one trust on the first to die. This is known as a bypass trust and done for a variety of reasons, but usually to take advantage of the federal estate tax exemption on the first to die.

In Pennsylvania, a trust like this will cause an immediate inheritance tax because a portion of the money is going to children who are taxed at a rate of 4.5%. Accordingly, if you are moving to PA from another state, it is highly likely that you should to redo your estate plan.

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