Inheritance Tax on House

[AAA128]

What is the name of your state (only U.S. law)? PA

There's a possibility we will be inheriting my husband's grandfather's house when he passes. I've been told that the grandparent/child relation isn't or may not be subject to inheritance tax. Is this correct?

If not, does the tax come "off the top" automatically? What happens if you can't pay the inheritance tax or get a loan to cover it?

 

[anteater]

There's a possibility we will be inheriting my husband's grandfather's house when he passes. I've been told that the grandparent/child relation isn't or may not be subject to inheritance tax. Is this correct?

No, the rate for transfers to lineal descendants is 4.5%.

If not, does the tax come "off the top" automatically? What happens if you can't pay the inheritance tax or get a loan to cover it?

Not sure what you mean by "'off the top' automatically." There are too many "ifs" to speculate. For example, grandfather's will could specify how any inheritance tax is paid - whether it comes from general funds in the probate estate or whether it should apportioned among those inheriting property or ...

 

[AAA128]

By "off the top" I mean will they figure out the taxes owed based on the entire worth of the estate's assets, then subtract that amount from the monetary assets left to go straight to the state.

But it looks like you're saying it's up to my husband's grandfather, and would have to be in the will, whether that's how it happens, or if everyone is responsible for their "share" of the tax?

 

[anteater]

By "off the top" I mean will they figure out the taxes owed based on the entire worth of the estate's assets, then subtract that amount from the monetary assets left to go straight to the state.

But it looks like you're saying it's up to my husband's grandfather, and would have to be in the will, whether that's how it happens, or if everyone is responsible for their "share" of the tax?

Generally, the usual method is that the probate estate's personal representative calculates the tax, pays it from the probate estate's liquid assets, and then apportions it by how much each of the beneficiaries are to receive in determining the final distribution. But there are many variations on that depending upon the provisions of the will and all the circumstances.

Unless grandfather is very close to passing away, I am suggesting that it is premature to begin worrying about inheritance tax. Too much can happen between now and when he does pass away.

 

[OHRoadwarrior]

How much is the house worth? How soon will grandpa be passing?

 

[AAA128]

How much is the house worth? How soon will grandpa be passing?

The house is worth around 160k and we don't know. He was given 6 months 5 years ago, has pretty uncontrolled diabetes, and a whole other host of health issues, such as colon cancer, weight issues, etc.