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Reviewing estate tax considerations

On Behalf of | Jun 27, 2022 | Estate Planning

As people in Ohio become more deeply engaged in the estate planning process, they quickly realize that one of its primary goals is to help preserve assets for their beneficiaries. However, many likely assume that there are some estate-related expenses that one cannot avoid.

Most would probably put estate taxes amongst this group. That assumption, however, may not necessarily prove true. Indeed, according to information shared by the website SmartAsset.com, Ohio does not levy a state estate tax against its residents (nor does it impose an inheritance tax). This means that the only potential estate tax burden one must plan for comes from the federal level.

The federal estate tax threshold

Through proper estate planning, one might even be able to minimize that potential burden (or even avoid it completely). The federal government allows for an estate tax exemption that actually excuses a majority of estates from a tax burden. Provided the total taxable value of one’s estate comes in under the exemption threshold, it will not be subject to tax.

Per the Internal Revenue Service, the exemption threshold for 2022 is $12.06 million. One might also coordinate with their spouse to effectively double that amount through the process of portability.

Estate tax portability

Portability refers to the sharing of tax benefits between eligible parties. In the context of estate taxes, a widowed spouse might claim their deceased spouse’s unused exemption amount. To maximize this benefit, one may leave their entire estate to their spouse. This allows the entire estate to pass tax-free due to the unlimited marital deduction. This preserves one’s entire estate tax exemption, which their spouse may then claim to push their estate tax exemption to $24.12 million. This benefit is not automatic, however; the surviving spouse must file an estate tax return electing portability the same fiscal year of their spouse’s death.

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