“Payable-on-Death” or Power of Attorney to Avoid Inheritance Taxes?

by LAS

Bereaved parents who added an adult child to their bank accounts have found that the state can tax their own money as an inheritance, if the child dies an untimely death.

Laws in Pennsylvania, Indiana, and Nebraska tax inheritances. Also, Iowa, Kentucky, Maryland and New Jersey tax inheritances but exempt parents from being assessed this tax. (NOTE: When I lived in Wisconsin I had to pay inheritance tax to the state as well as the federal government; I have no idea why Wisconsin is not on this list.)

So keep this in mind if you live in those states and you wish to have an adult child handle bills for your funeral and other debts without waiting for probate to be settled. We have found that most banks will allow you to put the name of an adult child on your account under the terms of “payable on death” – which would have avoided the cases of parents paying taxes on their own money because of an untimely death of the designated child.