The months following the passing of a loved one are a time of great difficulty and sadness for the surviving family. It is also during this time that the pressure to complete the legal and financial responsibilities for the estate begins. It is not uncommon and even quite natural to delay taking action to settle a loved one’s estate. The legal responsibilities can be overwhelming. But Pennsylvania has strict deadlines for completing the probate process. And even worse, failing to meet these deadlines can have financial consequences for the family and even personal liability for the estate’s personal representative.
The most common types of questions we are asked by new clients usually involve questions about the legal deadlines. What things must to be done and by what deadlines? What happens if the deadlines are missed? Will the Department of Revenue pursue me for financial penalties?
What are some of the key deadlines?
If your loved one left money, personal property or real estate in their name at the time of passing, those assets must pass through probate. The first legal step to starting probate is to obtain appointment as the estate’s representative. It is important to take this first step quickly. Many family members are unaware of the coming pitfalls caused by delays in appointing a representative.
Some of the major deadlines relate to Pennsylvania’s inheritance taxes. Our state imposes a tax on the entire estate of a deceased person. The amount of the tax depends upon the relationship of the deceased person to the person receiving property, presently between 4.5% to 15%. The tax must be paid, and the inheritance tax return filed, within nine months after death.
Nine months may seem like a lot of time, but it is often difficult to meet this deadline if there were earlier delays. When a loved one passes with various assets, it may be difficult to determine their value. It is often necessary to obtain valuation reports for real estate, collectibles, antiques and other property. In some cases, it may take time just to determine what assets are in the estate.
Real estate and business interests create special difficulties for some families. In the case of real estate, if the deceased died with one or more properties but few liquid assets, it may be difficult for the family to pay the tax without selling the properties. But it may not be possible to sell the property on time because of certain legal prerequisites.
Likewise, when a loved one passed with an ownership interest in a small business, it may be very difficult to determine the value of the business interest. But the tax remains due within nine months, even if the valuation of the business interest is not presently known.
What happens if the inheritance taxes go unpaid by the deadline?
It is very difficult to obtain an extension of time to pay inheritance taxes except for limited circumstances. The Department of Revenue will begin to impose interest and penalties against the estate if the taxes are unpaid after the deadline. The estate must pay these penalties, which reduces the ultimate distribution to the beneficiaries.
What is a better way to handle inheritance taxes?
The best way to handle inheritance tax deadlines is to file the tax return and make payment within three months of passing. Taxes paid within three months provide the estate with a discount of 5% off the taxes. In many cases, this can only be done through a very efficient administration of the decedent’s estate and anticipating issues before they arise.
As a probate law firm for estate executors, we help settle estates efficiently and reduce stress. If you know someone faced with a probate process or roadblocks to an estate property sale, please have them contact us for a free evaluation at:
Phone: (215) 918-4242
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If you are not quite ready for a consultation, download our probate handbook HERE. We’ll send you helpful probate guides and resources so you know how to handle the estate.