Adult children who have lost a parent often have a difficult path ahead. Not only do they have to process their grief, but they often have to address a variety of practical considerations related to their parent’s passing.
Children often have to plan the funeral for their parents and may also accept responsibility as the personal representative of their estates. Estate administration does come with a degree of risk. If the personal representative makes major mistakes regarding their management of estate assets, they might end up personally responsible for financial obligations they fail to fulfill.
One of the costliest potential obligations is the requirement to pay estate taxes. Which estates are subject to estate tax?
Only large estates must cover estate taxes
The federal government assesses a relatively sizable estate tax. Every year, the limit for an exempt estate changes. For individuals who die in 2025, the maximum exempt amount is $13.99 million. Any estate worth more than that may have to pay federal estate taxes.
The tax rate that applies depends on how much the value of the estate exceeds the exemption limit. The lowest federal estate tax rate is 18%, and the maximum tax rate is 40%. Personal representatives overseeing probate proceedings may need to retain property to cover that amount.
The failure to do so could lead to direct personal liability for any unpaid taxes. Personal representatives may also need to advise beneficiaries of their responsibility regarding inheritance tax. Pennsylvania collects an inheritance tax from those who receive property from an estate.
The tax rate depends on the age of the beneficiary and the nature of their relationship with the deceased individual. In most cases, personal representatives are not in a position to limit or prevent estate tax liability.
Typically, advanced planning is the only way to reduce how much estate value the federal government intercepts. Personal representatives may need help evaluating information about the estate to ensure that they fulfill their obligations and limit their personal liability.
Having support throughout the estate administration process can decrease the likelihood of a personal representative making mistakes that result in direct financial liability. Those who have guidance throughout estate administration are less likely to make mistakes and oversights that can result in costly implications.
