In Pennsylvania, two tax returns are likely needed following the death of an individual. First, the person’s executor or closest kin should make sure their final income tax return is completed. If the party was married at the time of death and previously filed taxes jointly with their spouse, their spouse can file on their behalf and include their income for the tax year in which they passed. If the party was not married, the executor or administrator should make sure a final individual income tax return is filed.
An inheritance tax return will also be needed to the extent the party left assets and/or debts. The inheritance tax return should be filed within a year of death. There is a discount if filed within nine months of death. There is no inheritance tax for assets passing between spouses. There is a 4.5% tax for assets passing to children or other lineal descendants. There is a 12% tax for assets passing to other relatives. There is a 15% tax for assets passing to non-relatives. It is common for a party’s will to provide that these taxes be paid out of their estate prior to distribution of the net estate. Alternatively, each beneficiary would be liable to pay their share of tax based on the assets they receive from the estate.