Imagine this scenario: your parents leave you an art collection worth $65 Million Dollars! Generally, you would think that this would be a good thing. Unfortunately, for the Sonnabend Family of New York, it was not.
The IRS soon sent the Sonnabend Family a bill for over $29 Million Dollars in estate taxes. While the artwork is very valuable, it contains a stuffed bald eagle, which under Federal Law cannot be sold. The fact that this artwork cannot be sold did not deter the IRS from demanding tax payment on the artwork.
While it is very unlikely that any of our parents will be leaving us artwork valued at millions of dollars, this situation with the Sonnabend family does point out the importance of addressing inheritance tax with our family members.
Regardless of the size of your estate, there are normally actions that you can take that will reduce, or eliminate the inheritance tax burden that is placed on your family.
Most people are unaware that when a resident of Pennsylvania passes away, the Commonwealth of Pennsylvania will levy an inheritance tax on assets that pass from the decedent to their family members. Depending on the size of your estate, the Federal Government will also tax these same assets.
This tax burden can be reduced by using simple estate planning methods such as joint ownership, gift giving and liquidation.