It is important for Pennsylvania residents to consider their estates and decide how their life savings and assets will be divided between heirs, charities and other groups. There is more to consider than just which people should be included in the division. The Internal Revenue Service taxes the estate taxes on the amount leftover after final income taxes, debts, funeral expenses and gifts to charity are deducted from the original estate amount. Currently, the IRS only imposes taxes on estates valued at more than $5.34 million. Once the taxes are paid, the balance may be distributed to the names heirs.
When writing out the will, people are encouraged to remember that assets can be freely transferred between spouses that are both United States citizens. There are no transfer taxes levied in this situation, but there may be transfer taxes imposed on gifts that are made to children and other heirs prior to your death.
Consumers are also warned that not all assets are bound by the same governing rules. Personal taxable accounts from corporations or IRAs are held to different standards. They do not necessarily transfer neatly to heirs, so consumers often choose to work with professional estate planners if they have these types of investment vehicles.
When deciding on the division of property, a benefactors goal may be to provide an equitable division of his or her assets while avoiding unnecessary taxation that could reduce the value of the estate. An attorney may be able to provide valuable estate tax planning and guidance for keeping the estate below key thresholds to avoid a hefty tax burden for the heirs in the future.
Source: Forbes, "Estate Planning 101: How to Divide Your Money", Larry Light, September 22, 2014