Ohio Inheritance and Estate Taxes: What You Should Know

Ohio has a unique tax system regarding inheritance and estate taxes, which is important for residents to understand. In recent years, the state has made significant changes to its tax laws, making it crucial for individuals to stay informed on how these changes may affect their estates.

First, it’s essential to differentiate between inheritance taxes and estate taxes. An estate tax is levied on the total value of a deceased person's estate before distribution to heirs, while an inheritance tax is imposed on the beneficiaries of the estate based on the value of what they inherit. In Ohio, there is no state inheritance tax, making it a favorable environment for heirs. This means beneficiaries won’t have to pay any additional state taxes on the assets they receive from the deceased.

However, Ohio does not impose a state estate tax as well. This was eliminated for deaths occurring on or after January 1, 2013. This change has simplified the process, allowing residents to plan their estates without the worry of hefty state-imposed taxes upon death.

While Ohio does not have state taxes on inheritances or estates, it’s important to remember that federal estate taxes may still apply. The federal estate tax exemption limit is quite high, making it applicable to only a small percentage of estates. In 2023, the exemption amount is $12.92 million per individual, meaning only estates valued above this threshold would be subject to federal taxation.

Even though Ohio avoids taxing estates and inheritances, it is essential for residents to carefully consider other aspects of estate planning. Factors such as probate costs, legal fees, and potential federal taxes should be taken into account. Establishing a comprehensive estate plan with wills, trusts, and durable powers of attorney can help mitigate these costs and streamline the distribution of your assets.

Additionally, certain property types, such as real estate, may be subject to local taxes and should be factored into estate planning. Property taxes remain applicable to real estate holdings, which can impact the overall value of an estate. For individuals with significant real estate assets, professional guidance can help minimize any tax liabilities effectively.

It is also wise for individuals to review their insurance policies. Life insurance proceeds aren’t subject to state or federal taxes; however, if owned by the deceased, they may affect the estate’s value for federal tax purposes. Properly structuring life insurance can help in avoiding unnecessary tax burdens.

In conclusion, while Ohio’s lack of state inheritance and estate taxes makes it a favorable place for estate planning, residents should remain vigilant regarding other potential costs and federal regulations. It is advisable to consult with an estate planning attorney or a financial advisor to develop a comprehensive strategy that addresses both current needs and future considerations.