CHAPTER 10
 

MISCELLANEOUS PROCEEDINGS

 

 
 
 
 

A.

Family Exemption
     
   
1.

When Allowed

     
   

The family exemption is a right to retain or to claim real or personal property of a decedent in a certain amount, presently $3,500. It accrues to the spouse of a decedent, and, if there is no spouse or if the surviving spouse has forfeited his or her rights, then to the children who are members of the same household as the decedent, and, if there are no such children, then to the parent or parents of decedent who are members of the same household as the decedent. See PEF Code §3121. The family exemption is in the nature of a property right and was originally based on the principle that in no event should the family be wholly deprived of support. It is preferred to all claims against the estate other than administration expenses, see PEF Code §3392, and may be a deductible expense for the purpose of Pennsylvania Inheritance Tax, 72 P.S. §9127(3).

     
2.   When Claimed
     
    The exemption should be claimed as soon as possible after the death of the decedent. It is a personal right and it can be lost if not claimed within a reasonable time. See Remick, §29.02, for other ways the exemption may be lost, waived or forfeited.
     
3.   Procedure
     
    The procedure for claiming the exemption depends on the circumstances. Any interested party may petition the Court to control the disposition of personal property claimed under PEF Code §3122. If there is a dispute or a question as to the rights of the claimant or the sufficiency of the net assets of the estate to pay the claim, or if the claim is made from real estate, then the procedure is initiated by petition to the Court, in accordance with the requirements prescribed by Phila.O.C. Rule 12.1.A-C. In addition to the procedure set forth in PEF Code §3123, a claim from real estate may be made by petition at the audit of the account. However, PEF Code §3126(b) limits the validity of an unrecorded decree setting apart a family exemption in the case of a subsequent bona fide grantee or lien holder.

Typically, the exemption is claimed from personal property of the decedent and the procedure is quite informal. The claimant simply notifies the executor or administrator of the claim by letter. If the claimant is the executor or administrator, he gives the letter to the estate’s attorney. If the claim is for specific property, it is set aside at the values fixed by the inventory, and, if the claim is for cash, it is paid to the claimant as soon as available after the administration of the estate is begun. If the claimant has possession of tangible property, he or she can retain it. In all events, the payment of the exemption is shown as a disbursement in the account and listed on the Pennsylvania Inheritance Tax return as a deduction. The family exemption can only be claimed against probate property and will be disallowed as a Pennsylvania Inheritance Tax deduction if there is no probate estate. However, it may not be claimed as a deduction on the Federal Estate Tax return as it is considered a terminable interest.
 

 


 
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