Estate Planning is not only for the wealthy

Pennsylvania inheritance tax has no general dollar threshold. A basic plan is about the house, the children, and who can act if you cannot.

Most people hear "estate planning" and picture a family office. That picture comes from the federal estate tax. The federal tax reaches only very large estates. For 2026, the basic exclusion amount is the multi-million-dollar range, on the order of $15 million per person. If that is the only tax you have heard of, the myth is understandable.

Pennsylvania has a different system.

Pennsylvania imposes an inheritance tax on transfers at death. There is no general dollar exemption. The rate depends on who receives the property. Under 72 P.S. § 9116:

• Transfers to a surviving spouse are taxed at 0 percent.

• Transfers between a parent and a child aged 21 or younger are also at 0 percent.

• Direct descendants and lineal heirs are taxed at 4.5%.

• Siblings are taxed at 12 percent.

• Other heirs are taxed at 15 percent.

• Qualifying charities and certain government entities are exempt.

• Property owned jointly between spouses is exempt.

The tax is due at death and becomes delinquent nine months later. If it paid within three months, a 5 percent discount is available under 72 P.S. § 9142.

A house in your name, and a paid-off car, go on the Pennsylvania inheritance-tax return at what they are worth on the date of death. A mortgage comes off the house. “Paid off” only means there is nothing to subtract from the car. Leave either one to a child and the rate is 4.5 percent. Leave it to a sibling and the rate is 12 percent. Leave it to anyone else and it is 15 percent. A spouse takes both at 0 percent, and a house owned jointly by spouses is exempt.

A 401(k) follows the beneficiary form, not the will. Once you were old enough to take the money, the balance is taxed to whoever is named, at that person’s rate, on the full date-of-death value. Name a child and it is 4.5 percent. Name your estate and the tax follows whoever inherits through the estate. Die before you could take the account, and it is generally left off the return. A spouse named on the form pays nothing either way.

Workplace life insurance on your own life is the exception. Those proceeds are exempt, whether they are paid to a person or to the estate. The policy that gets taxed is one you owned on someone else’s life.

Most of the work is not about tax. It is about who is allowed to act when you cannot.

If you are in a hospital and the accounts are in your name alone, your spouse does not automatically get to pay the mortgage from those accounts. A financial power of attorney is what authorizes an agent. A health care power of attorney and a living will guides medical decisions. A HIPAA release lets the people you choose receive information. None of those documents require wealth. They require adulthood.

If you die without a will, 20 P.S. § 2102 writes one for you. If you leave a spouse and children of that marriage, the spouse takes the first $30,000 plus half of the balance. The children take the rest. If any child is not also a child of the surviving spouse, the spouse's share is one-half, with no $30,000 preference. If you have minor children and no will, you also leave the choice of guardian to the court, without a written nomination for you.

A basic Pennsylvania plan is usually a will, a financial power of attorney, a health care power of attorney, a living willing, and a review of beneficiary forms on retirement accounts and life insurance. For many families that is the whole project. A revocable living trust is a tool for problems, especially probate and out-of-state real estate. It is not the price of admission.

Sojourner Law, PLLC advises individuals and families on estate planning, and estate administration in Pennsylvania.

This article is general information about Pennsylvania law as of October 2026. It is not legal advice and does not create an attorney-client relationship. Inheritance tax treatment depends on the asset, the title, and the beneficiary. Talk with a Pennsylvania estate planning attorney about your situation.