What If An Estate Owes Back Taxes?

There are so many considerations that go into taking over an estate when someone dies in Pennsylvania. This is one of the most complex states to become a beneficiary when someone passes away due to inheritance taxes and other considerations related to taking ownership of the estate. Pennsylvania makes inheritance laws more complicated than other states, mostly with regard to taxes and any amount of money that the estate owes when the decedent dies. This can make taking over an estate a thorny and unhappy process for the survivors of older family members.

What Happens if Someone Has not Paid Their Taxes in Pennsylvania?

When you become the beneficiary of an estate that owes back taxes, the process of handling this debt can be complicated. In the best-case scenario, the amount of the estate in assets, cash, and retirement benefits will cover the back taxes that are due. In the worst-case scenario, the amount that is owed in back taxes will not cover the amount that is owed in back taxes.

If back taxes are owed on the property and the estate cannot cover this amount, the home will likely be put up for an upset tax sale. This is a judicial sale that operates a little like a foreclosure might, and there might be an amount that is due to the mortgage company as well as the amount of back taxes that must be covered by this sale. If you do not mind letting the property go, you can allow it to sell for the price necessary to cover the amount that is due. You might already have been left without any money in the estate due to other bills, so sometimes this is the best thing to do.

You can stop the sale by paying the total amount that is due with charges and interest. You can also sometimes enter into an agreement to make payments on the amount that is due. There is also sometimes the option to redeem the property after a tax sale which is when you pay the buyer the tax sale amount paid plus interest to retain possession of the property.

Other taxes that are due can be more complicated to sort out and might require some investigation by your lawyer. You will find that the estate is always the first thing to be consumed to pay back debts and owed amounts in the form of taxes. You will also need to pay the inheritance tax that is owed. This can be any amount from 0 percent in the case of spouses to up to 15% in the case of distant family relations.

How to Avoid This Issue

If you have been thinking about your estate planning and you are worried about some back taxes that you think you might owe, now is the right time to sort this out. Everyone who lives in the state of PA should be aware that any amount of tax burden they have not paid will have to come out of their estate along with the state inheritance tax. You do not want to leave this burden to your family and the sooner that you take care of any issues related to your finances, the better.

Working with a skilled estate planning lawyer can help you to get your estate in good order before you die. It is never too soon to take care of your assets in such a way that no one will be burdened with unreasonable bills to pay and taxes to be taken care of with regard to your estate. If you have found yourself in possession of an estate that owes back taxes, a skilled estate lawyer will be needed to help you to resolve the various issues that can stem from this kind of owed tax situation. You should not try to navigate this process on your own because it is complex and it will probably just be one more stress that you do not want to have to deal with after losing a loved one.

At Antanavage Farbiarz, we offer expert estate planning services of various kinds. Our skilled Lawyers can explain all aspects of the estate planning process and work with you on various kinds of estate. We also offer expert guidance on making donations through wills, trusts, gifts, and other methods as well. To discuss your will and estate planning concerns, call us at (610) 562-2000 or use our contact form to schedule an appointment.

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