How Do I Know If I Need Estate Planning?
Everyone should have a basic estate plan to get their life and their affairs in order in the event that they unexpectedly become sick, injured, incapacitated or pass away. No one knows with certainty when these events will occur, but it is guaranteed that at least one will happen to all of us. An estate plan should leave an individual with a little peace of mind that their wishes will be honored regardless of what happens to them.
What Is The Current Federal Estate Tax Law?
The current federal estate tax law is a tax on and the ability to transfer property once someone has passed away. The Internal Revenue Service (IRS) will consider the value of all of a person’s possessions at the time of their death. Often this means that the value will not be what the person initially paid for those possessions, but the value of them at the time of death. The IRS refers to this as the gross estate, which can include personal belongings, cash that is in a bank account or safe, securities and equities, real estate and business interests. The current estate tax in the United States is 40 percent and it has been at that rate for several years.
If I Am Married, Is The Amount That My Spouse And I Can Pass Tax-Free Automatically Doubled?
A married person will receive several tax breaks under federal law for several different types of tax situations, and the estate tax exception is the amount of assets in the gross estate that can be passed tax-free upon someone’s death. This does not necessarily double the amount of assets that can be passed to the surviving spouse, but there is an unlimited marital deduction that allows a person to leave all or part of their assets to their surviving spouse free of federal estate tax. However, any married couple that is close to or exceeding the current federal estate tax threshold should get in contact with an estate planning attorney to discuss the myriad of planning tools that can be implemented to make full use of the exceptions and breaks provided by the IRS.
If My Estate Is Under A Certain Amount, Do I Have To Worry About Estate Taxes?
In the United States, the vast majority of heirs will not need to file a federal or state tax return. This is because the threshold is set so high, at more than $11 million. If a person’s estate exceeds $11 million, then their heirs can expect to pay a hefty estate tax of about 40 percent without a proper estate plan in place. There are several other ways to reduce any potential estate tax through annual gifting, the annual gift exclusion amount changed in 2018 to $15,000.
Does Ohio Have An Estate Tax?
Ohio was one of the first states to implement an estate tax, which they did in 1893 under former Ohio governor and President of the United States William McKinley. However, effective January 1, 2013, Ohio no longer has an estate tax. Individuals who died prior to January 1, 2013 are still subject to the Ohio estate tax and all the filing requirements that accompany the Ohio estate tax. The Ohio estate tax rate can be as high as seven percent of the gross estate, but it does not affect estates that have a value of less than a certain amount. There are several exceptions and tax credits available to reduce the value of the deceased person’s gross estate in Ohio.
Can I Avoid Estate Taxes By Giving Away My Assets Now?
An individual can reduce estate taxes by gifting their assets during life. There are specific IRS provisions that are in place, and there are obviously exceptions. Several rules and forms are required to qualify for different exemptions under gifting. Typically, the person giving a gift is required to pay the gift tax. The IRS has established the annual gift tax exemption, which increases from time to time. As of 2018, it is $15,000 per year. A person is typically considered to have gifted property when they give away money, stocks, real property, business interests, and several other items without expecting to receive something of at least equal value in return.
Can The Life Insurance Be Used To Pay Estate Taxes?
Life insurance is a great tool for estate planning and can absolutely be used to pay for estate taxes. In larger estates, it is very common. There are several other reasons to add life insurance to an estate plan, such as paying expenses that relate to unpaid bills, a mortgage, funeral costs, or the education of a surviving spouse, children or grandchildren. Life insurance can also be a nice inheritance for beneficiaries. Ultimately, the purpose of life insurance is to protect someone’s family or business from a financial loss at the time of their death.
For more information on Estate Taxes In Ohio, a free initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (937) 716-2033 today.
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