By Jeremy A. Wechsler, Esq.
Investment Advisor Representative
[email protected]
Two things in life are certain—death and taxes. Even more fun, they’re usually combined. Thankfully at the federal level, the exemption for estate taxes keeps rising. But if you’re a Pennsylvania resident, the PA Inheritance Tax is still with us, with rates ranging from 0% to 15% depending on the beneficiary:
- 0% – transfers to a spouse, charity, or to a child age 21 or younger
- 4.5% – transfers to lineal heirs (children over 21, grandchildren, parents)
- 12% – transfers to siblings
- 15% – transfers to all other heirs (nieces/nephews, friends, unrelated individuals)
PA taxes all property from the first dollar—there is no exemption. Life insurance payable to a named beneficiary is the one big exemption—everything else is fair game.
On the federal side, the landscape is shifting in 2026 thanks to the One Big Beautiful Bill Act passed earlier this year. Beginning January 1, 2026, the federal estate tax exemption will jump to $15 million per person (that’s $30 million for a married couple with proper planning). Anything above that is taxed at 40%–meaning an estate $5 million over the limit could face a $2 million federal tax bill. This exemption is tied to the lifetime gift tax, so if you use it for large lifetime gifts, it reduces what’s left for your estate.
Laws can change—in the last 25 years, there have been at least 4 major pieces of legislation that have been signed into law that change the estate tax. The exemption has increasingly risen in these years, but who knows what will happen down the road. Dynamic planning and continuing to monitor your own plan are key.
While I have you… A few more quick tax strategies:
- Give to charities through your IRA, not your will: Upon your death, any unused IRA money can be left directly to charity (via a beneficiary designation). If you are charitably inclined, this is a simple way to help a charity and also ensure the money in your IRA is never taxed.
- Use your annual gifting exemption: In 2025, you can give $19,000 per person per year without touching your lifetime exemption. A couple can give $38,000 to each child, grandchild, or whomever—every year. When making large gifts, it is best to speak with your advisor prior to executing your gift strategy.
- Don’t Forget Roth Conversions: There are many benefits to a Roth IRA, and engaging in strategic conversions can be a savings not just for you, but for your heirs.
Tax planning isn’t just for the ultra-wealthy. Keep an eye on this newsletter for new rules, laws, and strategies, and make sure to keep your estate plan up to date.