PRINTER'S NO. 1039
No. 921 Session of 1989
INTRODUCED BY GRUITZA, McVERRY, KOSINSKI, MAIALE, CHADWICK, HAGARTY, R. C. WRIGHT, WOZNIAK, HALUSKA AND PICCOLA, APRIL 3, 1989
REFERRED TO COMMITTEE ON FINANCE, APRIL 3, 1989
AN ACT 1 Amending Title 72 (Taxation and Fiscal Affairs) of the 2 Pennsylvania Consolidated Statutes, exempting spousal 3 transfers from inheritance taxation; providing for the 4 taxation of certain spousal trusts; and making technical 5 changes. 6 The General Assembly of the Commonwealth of Pennsylvania 7 hereby enacts as follows: 8 Section 1. Section 1707 of Title 72 of the Pennsylvania 9 Consolidated Statutes is amended by adding a subsection to read: 10 § 1707. Transfers subject to tax. 11 * * * 12 (d) Trusts and similar arrangements for spouses.--All 13 succeeding interests which follow the interest of a surviving 14 spouse in a trust or similar arrangement, to the extent 15 specified in section 1712 (relating to trusts and similar 16 arrangements for spouses), are transfers subject to tax as if 17 the surviving spouse where the transferor. 18 Section 2. Sections 1708(b) and 1711(k) and (m) of Title 72 19 are amended to read:
1 § 1708. Joint tenancy. 2 * * * 3 (b) Husband and wife.--[Except as provided in subsection 4 (c), this] This section shall not apply to property and 5 interests in property passing by right of survivorship to the 6 survivor of husband and wife. 7 * * * 8 § 1711. Transfers not subject to tax. 9 * * * 10 (k) Property subject to power of appointment.--Property 11 subject to a power of appointment, whether or not the power is 12 exercised, and notwithstanding any blending of such property 13 with the property of the donee, is exempt from inheritance tax 14 in the estate of the donee of the power of appointment, except 15 as provided in section 1712 (relating to trust and similar 16 arrangements for spouses). 17 * * * 18 (m) Husband and wife.--Transfers of property to or for the 19 use of a husband or wife of the decedent are exempt from 20 inheritance tax. Property owned by husband and wife with right 21 of survivorship is exempt from inheritance tax. [If the 22 ownership was created within the meaning of section 1707(c)(3) 23 the entire interest transferred shall be subject to tax under 24 section 1707(c)(3) as though a part of the estate of the spouse 25 who created the co-ownership.] 26 * * * 27 Section 3. Title 72 is amended by adding a section to read: 28 § 1712. Trusts and similar arrangements for spouses. 29 In the case of a transfer of property for the sole use of the 30 transferor's surviving spouse during the surviving spouse's 19890H0921B1039 - 2 -
1 lifetime, all succeeding interests which follow the interest of 2 the surviving spouse shall not be subject to tax as transfers by 3 the transferor, but rather shall be deemed to be transfers 4 subject to tax by the surviving spouse of the property held in 5 the trust or similar arrangement at the death of the surviving 6 spouse. Such succeeding interests shall be valued at the death 7 of the surviving spouse and taxed at the tax rates applicable to 8 dispositions by the surviving spouse. Any exemption from tax 9 based upon the kind or location of property shall be based upon 10 the kind or location of property held in the trust or similar 11 arrangement at the surviving spouse's death. 12 Section 4. Sections 1716(a)(1) and (2) and (e) and 1730(1) 13 and (2) of Title 72 are amended to read: 14 § 1716. Inheritance tax. 15 (a) Rate of tax.-- 16 (1) Inheritance tax upon the transfer of property 17 passing to or for the use of any of the following shall be at 18 the rate of 6%: 19 (i) Grandfather, grandmother, father, mother[, 20 husband, wife] and lineal descendants. 21 (ii) Wife or widow and husband or widower of a 22 child. 23 (2) Inheritance tax upon the transfer of property 24 passing to or for the use of all persons other than those 25 designated in paragraph (1) or exempt under section 1711(m) 26 (relating to transfers not subject to tax) shall be at the 27 rate of 15%. 28 * * * 29 (e) Compromise as to rate of future interests.--If the rate 30 of tax which will be applicable when [a future] an interest 19890H0921B1039 - 3 -
1 vests in possession and enjoyment cannot be established with 2 certainty, the department, after consideration of relevant 3 actuarial factors, valuations and other pertinent circumstances, 4 may enter into an agreement with the person responsible for 5 payment to establish a specified amount of tax which, when paid 6 within 60 days after the agreement, shall constitute full 7 payment of all tax otherwise due upon such transfer. Rights of 8 withdrawal of a surviving spouse not exercised within nine 9 months of the transferor's death shall be ignored in making such 10 calculations. 11 * * * 12 § 1730. Deductions not allowed. 13 The following are not deductible: 14 [(1) The value of assets claimed for the spouse's 15 allowance under 20 Pa.C.S. § 2102 (relating to share of 16 surviving spouse).] 17 (2) Claims of a former [or surviving] spouse, or others, 18 under an agreement between the former [or surviving] spouse 19 and the decedent, insofar as they arise in consideration of a 20 relinquishment or promised relinquishment of marital or 21 support rights. 22 * * * 23 Section 5. Section 1744 is amended by adding a subsection to 24 read: 25 § 1744. Source of payment. 26 * * * 27 (e.1) Trusts for spouses.--In the absence of a contrary 28 intent appearing in the instrument creating the trust or similar 29 arrangement, and in the absence of a contrary direction by the 30 surviving spouse, the inheritance tax, including interest, due 19890H0921B1039 - 4 -
1 at the death of a surviving spouse with respect to a trust or 2 similar arrangement to which section 1712 (relating to trusts 3 and similar arrangements for spouses) is applicable shall be 4 paid out of the principal of the trust or similar arrangement. 5 The payment shall be made by the trustee or other fiduciary in 6 possession of the property and, if not so paid, shall be made by 7 the transferee of such principal. 8 Section 6. This act shall apply to the estates of all 9 decedents dying on or after the effective date of this act. 10 Section 7. This act shall take effect July 1, 1989, or 11 immediately, whichever is later. B15L72CM/19890H0921B1039 - 5 -