“Information Bits from the Boss: Samantha provides brief answers to clients frequently asked questions”
What if I die and I have retirement accounts, what does that mean?
The first thing to know is that if you pass away and you had funds still in your retirement account then a Pennsylvania inheritance tax return would need to be filed. The executor would need to file an inheritance tax return disclosing the date of death value of that retirement account along with any other assets individually at the time of your death. There would be inheritance tax and the tax rate would be depending on what your relationship to the person who died. A spouse would pay 0%, children or parents pay 4.5%, siblings pay 12%, and anyone else, including nieces and nephews would pay 15%. That tax would be due within nine months of the date of death. Inheritance tax interestingly is a 0% for a spouse, but Pennsylvania still does require an inheritance tax return to be filed disclosing the date of death value even if the rate of tax is 0%. As we are dealing with clients, a lot of times we get calls saying my husband or wife just passed away, do I need to do anything. The answer to that may depend on whether or not there was retirement accounts. Upon your death, then there would be required minimum distributions that your beneficiary has to take from retirement accounts. If the beneficiary is a spouse, the spouse does receive a stretch out over his or her life expectancy, but the SECURE Act was passed at the end of 2019 and that law did remove the stretch-out for most other non-spouse beneficiaries. There are a few categories of beneficiaries that may qualify for the stretch-out, but most everyone else is going to have a ten-year payout, which means that the retirement account does have to be distributed within ten years of the date of death of the plan owner. If you have additional questions, please contact our office.