Pennsylvania Laws Regarding Deceased Parents' Bank Accounts

Pennsylvania law recognizes that in the days and weeks after a loved one dies, available cash on hand can be an issue. The state has a special rule regarding the bank accounts of recently deceased individuals. Moreover, the legislature amended the provision in 2013, so it’s even more generous than it was in the past to keep pace with inflation.

If your parent died after September 2013 when Pennsylvania’s legislation changed, the account may not be subject to probate. If your other parent is alive, he can take a copy of the death certificate to the bank and access up to $10,000 without involving the court or the will’s executor. Prior to 2013, the limit was $3,500 and the bank could, but didn’t have to, turn over the money. If your other parent is also deceased, you and your siblings can take advantage of this rule – otherwise, only your surviving parent can access the money.

To gain access to the bank account, you must first provide the bank with proof that your parent’s burial expenses were paid. You can either take a receipt from the funeral home or a signed statement from the funeral director indicating that you made arrangements to satisfy the bill. Additionally, if your parent’s bank account balance exceeds $10,000, you’re out of luck, as the account becomes part of her probate estate and is distributed according to the terms of her will. You’re not permitted to take the first $10,000 and leave the balance -- and if your parent had more than one account with the same bank, the balances of all the accounts cannot exceed $10,000 when added together.

Another way your parent’s bank account can escape probate is if it carried a transfer-on-death designation. Pennsylvania has adopted the Uniform Non-Probate Transfers on Death Act with regard to bank accounts, although this rule doesn’t extend to real estate or other titled property. If your parent made such a notation on the account, the money transfers to the person she named, regardless of the amount. This is different from a joint account, as the beneficiary would not have access to the account during her lifetime. The TOD designation only goes into effect after death.

Even if the bank account bypasses probate, you still have to pay inheritance tax on the balance. Although Pennsylvania doesn’t have an estate tax, it does tax each individual transfer of property, including bank accounts, from a decedent to a beneficiary. The beneficiary is liable for paying this tax, not the estate. The rate for transfers to the deceased’s children is 4.5 percent. You can take 5 percent off if you pay within three months and you can deduct any portion of the money that goes toward your parent’s funeral expenses. Pennsylvania also offers a family exemption of $3,500, so if you take possession of a $10,000 bank account and spend $5,000 on your parent’s funeral, the inheritance tax due on this asset would be only $67.50 -- $10,000 less $3,500 for the exemption, less $5,000 for the funeral, times 4.5 percent. This comes down by another $3 or so if you pay within 90 days.