What to Do When You Inherit Money in Pennsylvania
Inheriting assets involves a complex mix of grief and math. In 2026, new federal estate exemptions and Pennsylvania’s unique inheritance tax rules make your next steps critical. Learn how Harrisburg families can navigate the 10-year IRA rule and claim the PA early-payment discount.
You just inherited money. Here is what to do first: take a breath. Grief and money are a bad combination for fast decisions. PAC Financial, a financial advisory firm in Harrisburg, Pennsylvania, helps families across Central PA work through inherited assets step by step, so nothing falls through the cracks and no unnecessary taxes get paid.
Step 1: Understand the 2026 Pennsylvania Inheritance Tax
Pennsylvania is one of the few states with its own inheritance tax. The rate depends on your relationship to the deceased:
- Surviving Spouse: 0%
- Lineal Heirs (Children/Grandchildren): 4.5%
- Siblings: 12%
- Others: 15%
The "Free Money" Rule: If you pay the estimated tax within three months of the date of death, PA gives you a 5% discount. This is a critical component of proactive estate planning in the 717 area.
Step 2: The 10-Year Rule & Inherited IRAs
Under the SECURE 2.0 Act, most non-spouse beneficiaries must empty an inherited IRA within 10 years. In 2026, the IRS has clarified that if the original owner had already reached their Required Beginning Date (RMD age is now 73), you must also take annual distributions during years 1–9.
Cashing out a large IRA in a single year can trigger a massive tax bill; spreading it over a decade is often the smarter wealth planning move for Harrisburg residents looking to preserve their legacy.
Step 3: Leverage the Stepped-Up Basis
If you inherited a home in Mechanicsburg or stocks in a brokerage account, you likely received a "step-up in basis." This means your "cost" for tax purposes is the value on the date of death, not what the original owner paid. Selling these assets shortly after inheriting them often results in zero capital gains tax.
Step 4: Life Insurance Is Your Tax Haven
Proceeds from life insurance paid to a named beneficiary are generally income tax-free at the federal level and exempt from the PA inheritance tax. If you are looking to provide this same tax-free advantage to your own heirs, you can calculate your life insurance needs with our specialist, Christian Joseph Marrazzo.
Talk to PAC Financial
Call PAC Financial at (717) 564-6400. We help families across Harrisburg, Mechanicsburg, Hershey, and Carlisle turn an inheritance into a lasting legacy. Whether you're dealing with a complex estate or just need to know which tax form to file first, we’re here to help.
Compliance Notice
This information is for educational purposes only. Inheritance tax and IRA rules are subject to change. PAC Financial is a financial advisory firm serving Central Pennsylvania. Securities and advisory services offered through Osaic Wealth, Inc., member FINRA/SIPC.