What Happens When a Pennsylvania Resident Dies Without a Will?

If a Pennsylvania resident dies without a Will, that person is said to have died "intestate". The Pennsylvania intestacy scheme is governed by statute (20 Pa.Cons.Stat. 2101 et. seq.). Where the money goes depends in large part who survives the decedent.

Many people think that as soon as they get married that if they die, everything that they own will go to their surviving spouse. THIS IS NOT TRUE!

1) Scenario 1: A person is only survived by a spouse - If the decedent is survived by a spouse and does not have any surviving parents or issue (children or other lineal decedents) then the surviving spouse receives the entire estate.

2) Scenario 2: A person is survived by a spouse and parent(s) - If the decedent is survived by a spouse and at least one parent, but no issue, then the surviving spouse receives the first $30,000 and one-half of the balance of the probate estate. The balance would go to the surviving parent(s).

3) Scenario 3: A person is survived by a spouse and children from the marriage to the spouse - If the decedent is survived by a spouse and only children from their marriage, then the surviving spouse receives the first $30,000 and one-half of the balance of the probate estate. The balance would go to the surviving issue of the decedent. In most cases, the distribution will be made equally to a person's children, but if a child is not then living, then that deceased child's share shall go equally to that deceased child's children.

For example, let's assume Joey died with $300,000 and he is survived by his wife and one son. He also had one daughter, who died before him, but she had two children of her own. The widow would get $180,000 ($30,000+$150,000), the son would get $60,000 (1/2 of ($300K-$180K)) and each of the grandchildren would get $30,000 (1/4 of ($300K-$180K).

4) Scenario 4: A person is survived by a spouse and at least one child from another relationship - If the decedent is survived by a spouse and at least one children from another relationship, then the surviving spouse receives only one-half of the balance of the probate estate. The balance would go to the surviving issue of the decedent.

5) Scenario 5: Person is not survived by a spouse - If the decedent does not have a spouse, then his or her probate estate will first go to surviving issue, if any; then to surviving parents, if any; then to surviving siblings (or their issue), if any; then to surviving grandparents, if any; then to surviving aunts, uncles (or their children); if any. If none of these individuals survive the decedent, then the decedent's assets go to the Commonwealth of Pennsylvania.

You may have noticed that I used the term "probate estate" over and over in this entry. That is because the probate estate does not cover life insurance, retirement benefits, annuities, joint accounts, pay on death accounts or other moneys that are payable as a result of a contract. These assets are called "non-probate" assets and they do not pass according to the instructions of a Will nor do they pass via the intestacy laws. You must look to the terms of those documents to see who is entitled to what. Accordingly, when administering an estate, one must consider all assets - probate and non probate. If no beneficiary is named, then they do pass through the probate estate.

Unless you wish your assets to go according to the Pennsylvania intestacy scheme, you should draft a will so that your money can be distributed the way that you want when you pass.

Links to Important US-Japanese Tax Treaties

It is not always easy to find the treaties between America and Japan, so I have decided to post them here in case you would like to read them for yourself.

Here is the US-Japan Income TaxTreaty (2003) courtesy of the IRS.

This is an official version of the US-Japan Estate & Gift Tax Treaty (1954) thanks to the Ministry of Foreign Affairs of Japanese.

Estate tax liability for Non-Citizen Non-Residents of America

In this real estate market, some foreign investors may be tempted to buy property in the United States on the cheap. Overall, this may be a good idea, but I wish to caution you about one potential tax trap: When a person who owns property in America dies, and that person is not a citizen and is not a permanent resident alien, there will be a United States Estate Tax due based in part on the value of that property. What's worse is that the tax rate starts at 18% and quickly goes up to 45%!

American citizens and permanent resident aliens can pass on $3.5 million worth of assets before the estate tax hits. Non-citizen non-residents only have a tax exemption of $13,000, which shelters $60,000 worth of assets. (See Section 2102 of the Internal Revenue Code.)

So, let's assume you have a Japanese citizen (living in Tokyo) who owns a rental property in New York, and that property is valued at $500,000. Upon the death of the owner, a federal estate would be due in the amount of $57,800. Due to the credit, this is less than an 18% effective tax rate. Still, it may come as a rather large shock for those unfamiliar with US tax laws.

Even though Japan has a treaty with the United States, estate and gift tax treaties uniformly exempt real estate - so the country where the property is located gets to tax that property.

As long as you are alive though, you can still do planning to minimize or avoid this outcome by engaging in gift and trust planning.

Weird Wills

I happened to come across this interesting site at www.trutv.com which has a section that posts "Weird Wills". As a bit of a practical joker, I think my favorite is the Will of Charles Vance Millar.

Speaking of unusual Wills, if you haven't seen the movie "Brewster's Millions" - I highly recommend it as it deals with three subjects I love - baseball, estate planning, and practical jokes.

What Happens When a Bond Holder Dies?

I just came across this useful web site by the US Treasury Department, so I thought I'd pass along the information: US Treasury- Death of a Bond Holder

The important thing that you should know is as follows:

• If only one person is named on a savings bond, and that person is deceased, the bond becomes the property of their estate.
• If both people named on a bond are deceased, the bond is the property of the estate of the person who died last.
• If one of two people named on a bond is deceased, the surviving person is automatically the owner as if that survivor had been the sole owner from the time the bond was issued.

United Kingdom Inheritance Tax Update

The United Kingdom currently imposes an inheritance tax on assets in excess of £300,000 (slightly less than $500,000 based upon today's currency rates) when a person dies. The governing party, the Tories, had vowed to increase that threshold to £1,000,000. However, according to The Telegraph, due to the worldwide financial slowdown and mounting debt, it appears that they will not be able to keep that promise.

Thanks to the Wills, Trusts & Estates Prof Blog for bringing this to my attention.

New Jersey Tax Amnesty 2009

For those of you who may have had trouble with the NJ taxman, there is some relief. New Jersey is offering "Amnesty" of sorts to those who still owe money. The benefit is that the government is willing to waive penalties, some interest and collection costs in an effort to get the money now. You will obviously still owe the base amount of the tax and some interest.

If you have the money (or credit on your credit card) and you agree you owe the taxes, this is certainly a good time to settle up. If you do not agree or do not have the money to pay now, you must still try and explore your other legal options.

For more information about the "Amnesty", you should go to: taxamnesty.nj.gov