Section 94.3. Taxation of trusts terminated under 20 Pa.C.S. § 7710.1

(a) Effective for Resident and Non-Resident Pennsylvania Inheritance Tax Returns filed on or after July 1, 2012, wherein the person responsible for filing the return has not made an election to prepay tax under section 2113(a) of the Inheritance and Estate Tax Act (act) (72 P. S. § 9113(a)) concerning trust assets reported on the return as part of a qualified spousal trust under section 2113 of the act, the Department will reserve the right to assess Pennsylvania Inheritance Tax at the highest applicable rate in effect at the time the Department issues its initial Notice of Inheritance Tax Appraisement, Allowance or Disallowance of Deductions and Assessment of Tax, unless the person responsible for filing the return requests a Future Interest Compromise from the Department in conjunction with the filing and in the manner prescribed by the Department.

(b) If a Future Interest Compromise is not requested in accordance with subsection (a), the person responsible for filing the return shall acknowledge in writing, in the form and manner provided by the Department, the person’s assumption of liability for inheritance tax consequences that result from the termination of a trust under 20 Pa.C.S. § 7710.1 (relating to nonjudicial settlement agreements—UTC 111) that occurs after the return has been filed. This assumption of liability applies to a termination made without court approval or notice to the Department. This liability does not apply to a termination made under a specified termination date as contained within the trust instrument provided to the Department.

(c) If a trust has been terminated under 20 Pa.C.S. § 7710.1, without request for a Future Interest Compromise in accordance with subsection (a), the assets of the trust will be valued for Pennsylvania Inheritance Tax purposes as of the date of termination and tax will be due and owing as of the date of termination. Interest will accrue on an inheritance tax liability as of the termination date and in accordance with section 806 of The Fiscal Code (72 P. S. § 806).

The provisions of this § 94.3 adopted November 4, 2011, effective November 5, 2011, 41 Pa.B. 5994.