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TAXES INVOLVED IN AN ESTATE

There are many misconceptions regarding the taxes that are involved in an estate.  Here is a brief summary of the taxes that may be involved.

FEDERAL ESTATE TAX

Most relatively simple estates will face no Federal Estate Tax and do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $5,490,000 in 2017.  This is essentially doubled when a spouse is involved with the concept of "portability"  The portability election allows estates of married taxpayers to pass along the unused part of their exclusion amount, to their surviving spouse. This provision eliminates the need for spouses to retitle property and create trusts solely to take full advantage of each spouse’s exclusion amount.

OHIO ESTATE TAX

The state of Ohio repealed its estate tax effective January 1, 2013.  As a result, there is no estate tax on estates of individuals with a date of death on or after January 1, 2013. 

INCOME TAX

With the high exemption level of the Federal Estate Tax and the repeal of the Ohio Estate tax, most Ohio estates are left facing only an income tax bill.  However, this can be substantial if there has been a failure to plan.  Many people fail to recognize that their retirement plans consist of a high percentage of assets that are subject to income tax.  If this is coupled with a failure to either properly designate the beneficiaries, or poor decision making by the beneficiary, these assets may be subject to an accelerated payment of the income tax.  The top marginal income tax rate is currently in excess of 39%.  So, for example, if there were a $500,000 IRA that was mismanaged, the taxes would be in excess of $200,000.  

This huge income tax bill can be managed, reduced, or better yet, deferred with skillfully advised estate planning. Ask us about our IRA Trust and stretching out your IRA.

Check out our podcast episode all about Estate Tax Planning here: Estate Tax Planning in the COVID Era

Attorney Gregory S. DuPont PortraitGREGORY S. DUPONT, TAX ATTORNEY

Greg DuPont, JD, CFP®, is a well-respected estate attorney, financial advisor, public speaker, and published author. He has been serving clients as an estate and tax planning attorney since graduating from Capital University Law School in 1992 and added a wealth component to his practice over 15 years ago. He designed his firm to be the place where finance and law meet. He has been named one of Ohio’s Top 100 lawyers and was also recently named an Ohio Super Lawyer. Greg has been featured on WTVN radio and WCMH television. He is a life-long resident of Central Ohio and resides in Hilliard with his wife, Julia, and his daughter, Sophie.