Pennsylvania Inheritance Tax Cases
Last updated: 24 Oct 2025 •
Pennsylvania Inheritance Tax — Case Notes & Practitioner Commentary
Pennsylvania imposes an inheritance tax (not a modern state estate tax) under 72 P.S. (Inheritance and Estate Tax Act). Liability and rates depend on the transferee’s relationship to the decedent, with common rates of 4.5% for lineal heirs, 12% for siblings, and 15% for others. Transfers to a surviving spouse and to qualified charities are generally 0%. Practice turns on statute/text, Department of Revenue instructions (REV-1500 series), and probate coordination. 72 P.S. • REV-1500
Framework & Relationship-Based Rates
What it’s about
Pennsylvania taxes transfers at death to beneficiaries. The applicable rate depends on the beneficiary class.
Holding / Rule
Typical rates: 0% spouse/charity; 4.5% lineal descendants/ascendants; 12% siblings; 15% all others (unless a statutory exemption applies). Life insurance payable to a named beneficiary is generally exempt from PA inheritance tax.
Comment
Map each transferee to a statutory class early. Where bequests shift due to disclaimers or elections, confirm the final class to avoid rate errors.
Residents vs. Nonresidents — Situs & Scope
What it’s about
Residents are generally taxed on transfers of property wherever situated, subject to exclusions. Nonresidents are typically taxed on Pennsylvania-situs real property and tangible personal property; many intangibles of nonresidents are not taxed unless tied to a Pennsylvania business situs.
Holding / Rule
For nonresident decedents, include PA real estate and tangibles physically located in PA; exclude out-of-state assets and most intangibles lacking PA business situs.
Comment
Prove situs with deeds, appraisals, and custody records. For closely held entities, evaluate whether operations create a Pennsylvania business situs for otherwise intangible interests.
Spousal Transfers, QTIP, & Elective Share
What it’s about
Transfers to a surviving spouse are taxed at 0%. Planners often consider state QTIP elections to defer tax while preserving control over remainder beneficiaries.
Holding / Rule
Spousal transfers are exempt; a properly structured QTIP for Pennsylvania purposes can defer tax until the surviving spouse’s death on the QTIP remainder.
Comment
Maintain election statements and income-right documentation. Coordinate any state-only QTIP with federal filings to avoid mismatches in basis tracking and trust accounting.
Deductions, Credits & Probate Timing
What it’s about
Administration expenses, debts, and certain taxes/fees reduce the taxable transfer base; timing of probate approvals, fee orders, and claim resolutions affects deductibility.
Holding / Rule
PA accepts deductions substantiated by court orders, invoices, and proof of payment. Disputed or contingent items may require later amendment or reserves.
Comment
Calendar creditor windows, commission approvals, and audit timelines. Keep deduction allocation consistent across beneficiary classes when expenses are borne by the residuary.
Valuation & Appraisals
What it’s about
Fair market value at date of death (or alternate valuation where permitted under federal reference) drives the taxable base per beneficiary class.
Holding / Rule
Appraisals are expected for PA real property and significant tangibles. For marketable securities, broker statements and pricing support are standard.
Comment
Use local real estate appraisers; reconcile estate inventory values with return attachments to avoid mismatch queries by the Department or Orphans’ Court.
Family Farm & Family-Owned Business Relief
What it’s about
PA provides relief for qualifying family farms and certain family-owned businesses, potentially exempting or reducing the inheritance tax on eligible transfers that meet ownership, use, and post-death holding requirements.
Holding / Rule
Where requirements are met, eligible property can be transferred tax-free or at reduced exposure, subject to strict documentation and continued-operation rules.
Comment
Begin eligibility review early. Track ownership periods, employee counts, revenue mix, and post-death continuity; include supporting affidavits and schedules with the return.
References
- Pennsylvania Inheritance and Estate Tax Act (72 P.S.) — framework, rates, exemptions, deductions, situs.
- PA Department of Revenue — Inheritance Tax Return REV-1500 series (forms, instructions, schedules).
- Orphans’ Court practice — probate procedures affecting deductions, approvals, and timing.
- IRS Form 706 & valuation principles — used as reference for appraisals and FMV support (where helpful).