Philadelphia City Council’s Committee on Finance on March 3 voted to advance the “Generational Wealth Preservation Bill,” which would eliminate a significant financial barrier that can prevent families from passing homes from one generation to the next. The legislation would amend the Philadelphia Code to clarify that heirs are not required to pay the city’s realty transfer tax (RTT) when inheriting a family home with an outstanding mortgage that cannot be paid off by the estate.

Currently, only property transfers for “no or nominal actual consideration,” or homes that are paid off, are exempt from the RTT. For homes with an outstanding mortgage, the property does not qualify as being “for no or nominal actual consideration.” Therefore, heirs are required to pay the RTT on the remaining debt they assume from the estate before a new deed can be recorded, which can be thousands of dollars.

The bill will now return to City Council to be considered at an upcoming meeting.

“For many families, their family home is their single most significant asset to build and maintain generational wealth,” Majority Leader Katherine Gilmore Richardson, who introduced the bill, said in a news release. “When a family is navigating the loss of a loved one and working to settle an estate — and in some cases resolve a tangled title — the last thing they should face is an unexpected and significant tax bill simply for trying to keep their home. Treating the inheritance of a family home as a taxable transaction is inequitable, placing the greatest burden on families with the fewest resources and creating unnecessary barriers to maintaining ownership. This legislation removes that obstacle and helps ensure more families can keep their homes and have the opportunity to build generational wealth.”

During the hearing, the committee heard testimony in support of the legislation from legal service agencies, city officials and a community representative.

“When a loved one passes away, families should be focused on preserving their home — not figuring out how to pay an inflated tax bill,” said James P. Leonard, the city’s Commissioner of Records, in a prepared statement. “This bill keeps the cost of untangling titles down, helps families build generational wealth, and directly supports Mayor Parker’s H.O.M.E. Initiative to preserve home ownership in Philadelphia.”