How Tax Laws Affect Estate Planning

Most people don’t count themselves among the rich, and therefore, might not think about the effect of estate taxes on their financial futures. While many tax provisions don’t directly impact 99% of US citizens, you still have to consider the tax implications for estate planning. If all of this sounds complex and confusing, it helps to turn to an attorney in your area who can guide you in your asset protection strategies.

Here’s what you need to know to distribute your assets as you see fit and to reduce the tax burden on the loved ones you leave behind.

Estate Taxes and How They Affect You

An estate tax, sometimes called a “death tax,” aims to prevent the extreme and unchecked concentration of wealth. Before beneficiaries receive their shares, estate taxes are based on the total value of a deceased person’s (or decedent’s) estate. More specifically, the estate pays its fair share of taxes before the distribution of assets to heirs.

The thought of federal and state estate taxes can leave you feeling uncertain about what may be left for beneficiaries. But let’s start with the good news: there’s no estate tax in Ohio; it was repealed in 2013.

However, federal estate taxes may still apply to you depending on what you own. As of 2025, individual estates worth more than $13,990,000 are subject to the federal estate tax. If you’re married, your combined estate of $27,980,000 (twice the individual amount) would be taxed. A lawyer focusing on tax law or estate planning can help you verify your estate’s worth and reduce your tax liability.

Capital Gains And Estate Planning

Capital gains tax is different from estate tax. Recall that estate taxes are the responsibility of the estate. Capital gains taxes are generally paid by beneficiaries when they sell the assets bequeathed to them for more than what they were initially worth.

However, when someone inherits property in the event of a death, that property’s tax basis is “stepped up.” This means the tax basis would be the property’s current value. If that property is a gift rather than an inheritance at the time of death, a “stepping up” of the tax basis doesn’t occur. The person receiving the gift must then pay a capital gains tax.

In the past, people avoided estate taxes by passing property along in a Trust, thinking the capital gains tax they’d have to pay would be less than the estate tax. But unless you’re passing an estate worth more than the amount allowed for each individual, in which case the federal estate tax would be an issue, your beneficiaries are generally better off inheriting the property.

Stay a Step Ahead with Expert Estate Planning

What’s true about tax laws now could change anytime, but a trusted estate planning attorney will stay on top of these developments and keep you updated. With that in mind, talk with someone on our legal team at Donnellon, Donnellon & Miller if you have questions about taxation or other estate matters. We can help you set up asset protection tools to ease your tax burdens, which your surviving family members will appreciate!