This has been an issue for decades and the law has been somewhat confusing and complicated regarding Estate Planning and Step-children.
Pennsylvania enacted the country's first inheritance tax act in 1826. See Act of April 7, 1826, 1826 P.L. 227 (the “1826 Act”). Numerous amendments were made to the original law in 1905 and 1961. In 1982, the General Assembly added Chapter 17, regarding Inheritance and Estate Taxes, to Title 72 (Taxation and Fiscal Affairs) of the Pennsylvania Statutes.
Then, in 1991, the General Assembly repealed Chapter 17 and added the Inheritance and Estate Tax provisions as Article XXI of the Tax Reform Code of 1971.
For additional background information see footnote references below at 1 and 2.
At that time, the General Assembly amended, once again, the definitions of "Children" - "Includes natural children whether or not they have been adopted by others, adopted children and stepchildren," and "Lineal descendants" - “[a]ll children of the natural parents and their descendants, whether or not they have been adopted by others, adopted descendants and their descendants and step descendants.”
This remains the current language under 72 Pa. C.S. § 9102. In none of the previous versions of the statute, or the official comments thereto, did the General Assembly indicate that it intended to change the law by excluding the “children of a former husband or wife” from the definition of “lineal descendants.”
For purposes of this article, it is important to note the definition of "Transferee" under the same statute - "Any person to whom a transfer is made and includes any , , , , , , vendee, assignee, donee, surviving joint tenant and insurance beneficiary." Thus, a "transfer" of assets must be made to one of the "transferees" listed in the statute for the Inheritance Tax provisions to become applicable. If no "transfer" is made, the Inheritance and Estate Tax provisions do not apply.
While the Inheritance and Estate Tax provisions in Pennsylvania do cover step-children under the term "lineal descendants" for the purpose of collecting an inheritance tax, that does NOT mean that all step-children are included in an Estate as "lineal descendants" or "lineal heirs" or that they can make a legitimate claim against an Estate.
The law regarding Estates makes clear that unless the deceased adopted his or her step-children, the step-children have no legal right to an inheritance from the decedent despite what the law states regarding inheritance taxation. Thus, if a step-child is not included in the decedent's Will, the step-child has no claim to the decedent's estate. And if the decedent dies "intestate," i.e., without a Will, the step-children have no legitimate claim as "lineal heirs" to the assets of the Estate. Simply put - step-children do not have inheritance rights unless they were named in the step-parent's/decedent's Will or they were adopted by the step-parent/decedent.
Thus, the provisions in Inheritance and Estate Tax provisions only come into play if and when -
1. the step-child, who is listed in the step-parent's Will, receives assets that are "transferred" from the Estate of his or her step-parent as stated in the step-parent's Will, or,
2. the step-parent dies intestate, and the step-child was, in fact, adopted by the deceased step-parent before the step-parent's death, AND the adopted step-child receives assets that are "transferred" from the step-parent's Estate to the adopted step-child.
Only when those two scenarios take place, do the provisions of the Inheritance and Estate Tax provisions apply to step-children. To be clear, the provisions of the Inheritance and Estate Tax provisions do not give step-children any additional rights under the law pertaining to Estates. The Inheritance and Estate Tax provisions were designed to collect as much money in taxes as possible, and therefore, the General Assembly made clear that if assets are bequeathed or "transferred" to a step-child from an Estate under the terms of a Will or Trust, that step-child will be treated as a "lineal heir" and will be taxed at the same rate as the decedent's child or as a direct descendant of the decedent. If that same step-child is NOT named in his or her step-parent's Will or is NOT adopted by his or her step-parent in the event of intestacy, that step-child has no legitimate right to make a claim against his or her step-parent's Estate.
Consequently, if a step-parent does not want to leave anything to his or her step-children, the step-parent does not have to do anything to exclude the step-children from his or her Estate. However, if the step-parent does want to leave his or her step-children any part of his or her Estate, the step-parent must name the step-children in his or her Will or other Estate Plan documents, e.g., a Trust. Or the step-children must be adopted by the step-parent to ensure the step-children are included as "lineal heirs" to the step-parent's Estate in the event the step-parent dies intestate, i.e., without a Will.
Inheritance tax is imposed as a percentage of the value of a decedent's estate transferred to beneficiaries by Will, heirs by intestacy, and transferees by operation of law. The tax rate varies depending on the relationship of the heir to the decedent.
The rates for Pennsylvania inheritance tax are as follows:
Property owned jointly between spouses is exempt from inheritance tax.
See the following article for additional information: https://www.rjfesq.com/estate-taxes
Step-children are the children of your partner or spouse; you have not adopted them. (If you have adopted them, your adopted children are legally your children, with the same legal connections to you as children born to you.)
There is no legal tie between you and your step-children; your step-children are not considered your legal heirs. In terms of will-making, you have no obligation to leave anything to your step-children. While most state laws do not require anyone to leave property or assets to their children, they do have laws that:
See Footnote 3 below.
But these laws do not apply to step-children. In effect, your legal relationship with your step-children is equivalent to someone with no familial relation - like a friend or neighbor.
The flip side of this is that if you do want to ensure your step-children receive something when you die, you must make a Will or Trust and name them specifically. If you die without a Will, your step-children receive nothing of your Estate.
If you make a Will that leaves gifts to "my children," your non-adopted step-children will not be included in that group. Again, even if you might think of them as your children, they are not legally considered to be your children. Making gifts to categories of people opens up the possibility of confusion, and is generally not advised.
If you want to make sure that your step-child receives an inheritance, consider the following.
First, if you want to leave a gift to a step-child, you certainly can, just as you would leave a gift to anyone else. Step-children can always inherit under your Will if you name them. Using your Will, you can leave your step-child a percentage of your entire Estate, or you can leave specific gifts - like $5,000, your computer, or your golf clubs.
If you have other children, when you make your Will do not use terms like ''issue,'' ''descendants,'' ''children,'' or ''heirs” to refer to them. Those terms are always subject to confusion, and they are additionally complicated for blended families with step-children. Instead, name each child and each step-child using their individual names.
In addition to (or instead of) using a Will, you can also leave gifts to your step-child using a number of other Estate Planning tools. For example:
Of course, you'll need to keep in mind that any gift you leave to your step-child will reduce the amount of property available to your other beneficiaries - your other children and your spouse. For some people, this can be an area of concern. See “Leaving an Explanation of Your Decisions,” below.
As noted earlier, you do not have to do anything to ensure that your step-children receive nothing through your Will. Your step-children have no rights to the property in your will unless you name them. If you leave nothing to them in your Will, they will get nothing.
One important caveat: If you're married, your step-child could end up with some of your property via your spouse or partner.
If you are married or partnered with your step-child's parent, you will likely leave a good portion of your Estate to your spouse or partner. If you die first, your spouse or partner will inherit the assets you bequeathed to them and they will be free to leave (or give) that property to your step-child. In this way, your step-child could eventually inherit assets from your Will or Trust, proceeds from your life insurance, your personal effects, and anything else that you leave to your spouse or partner.
This scenario also holds true if you do not do any estate planning. If you are married and do not have a Will, everything you own (that does not have a beneficiary designation) will go to your spouse and children. They will then be free to leave (or give) that property to your step-child.
If this concerns you, it is avoidable, but you have to plan for it. For example, you can set up a “Marital Bypass Trust.” This type of Trust allows your spouse or partner to use your property after you die, for the rest of his or her lifetime. Your spouse or partner will never own the property and will never have the right to give away the property. When he or she dies, your property will go to the beneficiaries you name. Our firm can assist you with this type of arrangement.
Consider whether it would make sense for you to explain the decisions you made in your Will, Trust, or general Estate Plan. When families blend together, family relationships can become complicated and strained - especially when it comes to who gets what. If you think your family will have questions or concerns about the plans you make, there are steps you can take to mitigate the possibility of familial strife.
First, if possible, talk to each member of your family to explain your plans and your reasoning. This is your best chance of creating peace because you will be available to answer questions and have follow-up conversations.
However, if talking it over is not possible, you can also leave a letter to your survivors explaining the decisions you made. The letter will not have any legal weight, but it can be a comfort to you and to those you leave behind. In it you can address certain issues:
There is no official form for this type of letter. You can make it what you want it to be. Just be careful not to contradict the terms of your Will or Estate Plan. Leave your letter with your other Estate Planning documents.
Also, if you have any real concerns that someone may contest your Will or challenge your Estate Plan, or otherwise anticipate inheritance issues with step-children, get help from an attorney who can help ensure that your wishes are followed.
1. There is a long and complicated history relevant to the Tax Code, which has been researched and reported in a fine article authored by Adam T. Gusdorff and Erica A. Russo, entitled Once a Stepchild Always a Stepchild: The Fallacy of 'Former Stepchildren' and Pennsylvania Inheritance Tax published in the Real Property, Probate & Trust Law Section Newsletter • Pennsylvania Bar Association • Summer/Fall 2021.
2. If necessary you can read the relevant statute sections here: https://casetext.com/statute/pennsylvania-statutes/statutes-unconsolidated.You need to make your way to Title 72 P.S. - TAXATION AND FISCAL AFFAIRS (§§ 1 — 10009). There you will find Chapter 5 - The Tax Reform Code of 1971, which includes Article XXI - INHERITANCE TAX (§§ 9101 — 9196).
3. In most states, your children are not entitled to any of your property - you can leave them nothing and you can specifically disown them. However, there are a few exceptions. For example, in Louisiana, children under 24, as well as some children with disabilities, have the right to one-quarter to one-half of a parent's estate. (Louisiana Civil Code 1493). There are certain circumstances under Louisiana's forced heirship rules wherein the parent may legally disinherit their child, who would otherwise be a forced heir. In all of these cases, the parent must write a Will that specifically disinherits the forced heir, naming the cause for disinheriting the child. (Louisiana Civil Code 1621). Are unadopted stepchildren considered legal heirs in Louisiana? The answer is NO. (Louisiana Civ. Code, Article 880). In Florida, children have a right to inherit a parent's residence. (Florida Statutes 732.401.) Note that the term, “Child,” under Florida law, includes a person entitled to take as a child under this code by intestate succession from the parent whose relationship is involved, and excludes any person who is only a stepchild, a foster child, a grandchild, or a more remote descendant. (Florida Statute 721.201). In those two states, if you do not provide for these children in your Estate Plan to the extent that they are entitled, i.e., the forced heirs in Louisiana and the children by blood in Florida, they can petition the court to obtain their rightful share of their parent's Estate. But for the most part, a parent can leave a child out of a Will.
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This is not tax advice and should not be construed as such. Please seek professional tax services for more information and advice that will apply to your specific tax situation.