Ohio Residents Do Not Have To Pay Estate Taxes, but……

Estate taxes and inheritance taxes are always a concern for people who have assets they want to leave to family members or other persons. These taxes are also a concern for beneficiaries of estates. Ohio estate taxes and inheritance taxes were eliminated in 2013.  when the state passed a law eliminating these taxes. However, an Ohio resident may incur an inheritance tax under certain circumstances if they inherit money from a resident of one of these six states that levy an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.

Difference Between Estate Tax and Inheritance Tax

Cincinnati tax attorneys

An estate tax is a tax levied on property and other assets when the owner dies in a state that has an estate tax. An inheritance tax is levied when a person inherits property from a resident of a state that has an inheritance tax. This means that if an Ohio resident inherits property from a resident of one of the six states that have an inheritance tax, that state will impose an inheritance tax on the Ohio resident. An estate tax would not be levied.

While an Ohio estate tax is not a concern, there are other taxes that may be levied when an Ohio resident dies. Retirement accounts held by an Ohio resident are an asset that is subject to income tax. The beneficiary of an IRA or a 401(K) account will have to pay income tax on money they withdraw. Some of these plans may have after-tax contributions, and these would not be taxed upon withdrawal. Withdrawal rules are complex and they are different for surviving spouses than for other beneficiaries. Consulting an estate attorney would be wise in this matter.

When an Ohio resident inherits a retirement account from a resident of a state that levies an inheritance tax, then the Ohio resident will have to pay this tax to the state where the decedent lived. An Ohio estate tax would not be levied.

Roth plans are different from the 401(K) and IRA plans in that these funds have already been taxed. However, the beneficiary may incur an income tax under certain circumstances – this should be discussed with an estate attorney.

There are no federal estate taxes on an estate that is worth less than $11.18 million.

Although Ohio does not levy an estate or an inheritance tax, Ohio residents may have family members in states that do levy an inheritance tax. Or, an Ohio resident may inherit a retirement account which might involve an inheritance tax or state and federal income taxes. Discussing with an estate attorney the type of assets which are inherited can save needless worry and expense.

Work With An Attorney To Same Time and Money

Having a legal team that understands the fine print details about estate planning is a smart move. Whether your concern is taxation, establishment of trusts, Will writing, or anything else regarding your estate, it makes sense to speak with an attorney.

You can draft all of your estate documentation at the same time, which can save you considerable time and expense.

Preparing these legal documents at once will give you the chance to establish your estate in such way that all elements work in tandem. Your Will and your durable power of attorney have a fair amount of overlap, for example. And the forms which establish your trust(s) have a good amount of legal language in common with the other two as well.

If you are curious about these topics, please contact our office, and we would be happy to speak with you about your estate plans and the legal protections you have in place for your family and other loved ones.

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