Congress has acted to make the elevated federal estate and gift tax exemption permanent — and increased it to $15 million per person. For Pennsylvania families, this changes the calculus on gifting strategies, irrevocable trusts, and business succession planning. Here is what you need to know.
The Federal Estate Tax Exemption: The Biggest Planning Issue of the Decade
Congress acted before the scheduled sunset and made the elevated federal estate and gift tax exemption permanent — increasing it to $15 million per person (approximately $30 million for a married couple). This removes the uncertainty that had been hanging over estate planning for years and allows families to plan with confidence.
What this means for most Pennsylvania families: The vast majority of estates will never be subject to federal estate tax at a $15 million exemption. For these families, the focus of estate planning remains what it has always been — ensuring assets pass to the right people, minimizing Pennsylvania inheritance tax, avoiding probate complications, and protecting against incapacity.
What this means for higher-net-worth families and business owners: The permanent elevated exemption is an opportunity to revisit strategies that were designed around uncertainty. Irrevocable trusts, family limited partnerships, and other vehicles created specifically to minimize estate tax exposure should be reviewed to confirm they still serve your goals.
Portability remains important: The ability of a surviving spouse to use a deceased spouse's unused exemption — known as portability — must be elected on a timely-filed estate tax return. Even for estates well below the exemption, the portability election can provide meaningful protection against future changes in the law.
Annual Gift Tax Exclusion: Use It Every Year
The annual gift tax exclusion — the amount you can give to any individual each year without using any of your lifetime exemption — has increased to $19,000 per person per year (up from $18,000 in 2024). For a married couple using gift-splitting, that is $38,000 per recipient per year, completely free of gift tax and without touching your lifetime exemption.
Annual gifting is one of the simplest and most effective estate planning strategies available:
- Parents with multiple children can transfer significant wealth each year without any tax consequence
- Grandparents can gift to grandchildren directly, or to 529 accounts (with 5-year front-loading up to $95,000 per beneficiary)
- Business owners can begin transferring business interests annually to the next generation
The exclusion resets on January 1 each year — unused exclusion does not carry forward. If gifting is part of your strategy, make sure you are using it consistently.
Pennsylvania Inheritance Tax: What Hasn't Changed (And Why That Matters)
Pennsylvania remains one of only six states with an inheritance tax. The rates have not changed:
- 0% — transfers to a surviving spouse
- 0% — transfers to charities
- 4.5% — transfers to direct descendants (children, grandchildren) and direct ancestors (parents)
- 12% — transfers to siblings
- 15% — transfers to all other beneficiaries
One change worth noting: transfers to stepchildren are taxed at 4.5% — the same rate as biological children. This is relevant for blended families and should be reflected in how your estate plan addresses beneficiary designations and asset titling.
The 5% early-payment discount remains available: if inheritance tax is paid within three months of death, the estate receives a 5% discount on the amount paid. This is a meaningful savings that executors should plan for.
Pennsylvania's Unclaimed Property Law: A Hidden Estate Planning Issue
Pennsylvania has one of the most aggressive unclaimed property programs in the country. Under Pennsylvania's Disposition of Abandoned and Unclaimed Property Act, financial assets — including bank accounts, brokerage accounts, insurance proceeds, and even safe deposit box contents — that go unclaimed for a defined period are escheated to the Commonwealth.
The dormancy periods are shorter than most people expect:
- Bank accounts: 3 years of inactivity
- Stocks and dividends: 3 years
- Life insurance proceeds: 3 years after the policy matures or is payable
- Safe deposit boxes: 3 years after expiration of the lease
What this means for estate planning: If your estate plan leaves assets to beneficiaries who may not know to claim them — or if your estate includes old accounts your executor might not discover — those assets can be lost to the Commonwealth before they're distributed.
Good estate planning addresses this through a comprehensive asset inventory, clear beneficiary designations, and executor instructions that cover all account types including older or dormant accounts.
Small Estate Procedures: Ongoing Developments
Pennsylvania's small estate threshold for Voluntary Administration — currently set at $50,000 in probate assets — has been the subject of ongoing legislative attention. There have been proposals to increase this threshold to better reflect current asset values, as $50,000 no longer goes as far as it once did.
If the threshold is increased, more estates will qualify for simplified administration — potentially avoiding the full Register of Wills process. Estate plans that currently route assets through probate based on an assumption about the small estate threshold may need adjustment if the law changes.
We will update this post as any legislative changes are enacted.
SECURE Act 2.0 and Inherited IRAs: Still Creating Problems
The SECURE Act and its follow-on legislation (SECURE 2.0) eliminated the "stretch IRA" for most non-spouse beneficiaries, replacing it with a 10-year rule that requires inherited retirement accounts to be fully distributed within 10 years of the original owner's death. For many beneficiaries — particularly those in their peak earning years — this creates a significant income tax problem.
Estate plans drafted before the SECURE Act may name trusts as IRA beneficiaries under rules that no longer work as intended. Conduit trusts, accumulation trusts, and other trust structures designed around the old stretch IRA rules may produce unintended tax consequences under current law.
If your estate plan names a trust as a beneficiary of an IRA or 401(k), it needs to be reviewed in light of SECURE Act changes.
When to Review Your Estate Plan
As a general rule, review your estate plan when:
- A major tax law changes (and one just did, or is about to)
- You experience a major life event — marriage, divorce, death of a spouse or beneficiary, birth of a child or grandchild
- Your assets change significantly — sale of a business, inheritance, major real estate transaction
- You move to a new state
- Three to five years have passed since your last review
At Ament Law Group, we offer estate plan reviews for clients who want to make sure their documents still accomplish their goals. Contact us to schedule a consultation.
This article is for general informational purposes only and does not constitute legal advice. Tax laws are subject to change; consult a licensed Pennsylvania attorney and qualified tax advisor for guidance specific to your situation.
Need Help with Your Estate?
At Ament Law Group, P.C., we help Pennsylvania families protect their wealth and plan for the future. Whether you need a trust, will, or probate administration assistance, our team is here to guide you every step of the way.
Call us today at (724) 733-3500 to schedule your consultation.