Minimizing Estate Taxes

An estate with assets in excess of $338,333 may be subject to Ohio estate tax (currently at six to seven percent).  Note that, for a married couple, there is an unlimited marital deduction for estate assets passing to one’s spouse, so tax consequences may not be felt until the second spouse dies.

If you are an Ohio resident with more than $338,333, it is sometimes advisable to reduce the value of your estate ahead of time to minimize the estate taxes due after your death.

Gifting is the most common strategy for reducing estate taxes.  For federal tax purposes, a person can gift up to $13,000 per donee per year.  (The limit is $10,000 per donee per year for Ohio tax purposes.)  In addition, excess gifts (above the federal limit) totaling up to $1 million can be made during an individual’s lifetime with no federal gift tax due.  (Note:  the sum of these excess gifts reduces the federal estate tax exemption by a corresponding amount.) >>Click here to learn more about gifting.

A married couple with assets over $3.5 million may choose to set up a Credit Shelter Trust, commonly known as an AB Trust, to avoid or reduce federal estate tax.  This type of trust is complex, but it makes full use of the estate tax exemption for both spouses to shelter up to $7 million, thus potentially saving a significant amount of tax dollars.