- The Pennsylvania inheritance tax does not apply to anything you transfer but still retain some sort of control over or use of during your lifetime. Merely transferring a piece of property to someone for use in name only where you still use and "control the enjoyment of" the property or asset will not allow the property to avoid being taxed under the inheritance tax.
- Any property that you transfer less than a year before your date of death can be subject to the Pennsylvania inheritance tax. First, the state examines whether the fair market value of the property or asset exceeds $3,000. Second, the key analysis is whether or not you received "adequate consideration" in money or bartering for the property or asset you transferred. Adequate consideration basically is examined on a case-by-case basis, but the term is used to combat those who might try to sell a house to a friend for a $1 to avoid paying the inheritance tax.
- Pennsylvania law does exclude some transfers from the inheritance tax, regardless of when they take place. Transfers to the government, certain charities that qualify under law and transfers to veterans' organizations are exempt from the Pennsylvania inheritance tax. There are also some assets in a person's estate that will not be subject to the inheritance tax: life insurance benefits, Social Security death payments and some employment benefits may also be excluded. Also, any transfer to a surviving spouse is technically "taxed," but at a zero percent rate, so no tax is paid.
- At the time of publication, the Pennsylvania inheritance tax has three different rates. Property that is transferred to lineal heirs --- grandfather, grandmother, father, mother or children --- is taxed at 4.5 percent. Property that is transferred to siblings (brothers or sisters) is taxed at 12 percent. All other transfers that are subject to the inheritance tax are taxed at 15 percent.
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