Most people who are creating an estate plan want to ensure that they’re leaving their loved ones as much as possible. One thing that could eat away at that total inheritance is taxes.
Ohio doesn’t have an estate tax, so you’ll only have to think about federal taxes. Understanding a bit about these may help you determine how to set up your estate and what steps you need to take while you’re still alive.
Federal estate taxes
In 2024, federal estate taxes apply to the transfer of property at death and are governed by specific thresholds and rates. The federal estate tax exemption for 2024 is set at $13.61 million per individual. This means that estates valued below this amount aren’t subject to federal estate tax.
For married couples, the exemption can be effectively doubled to $27.22 million, thanks to the portability provision, which allows a surviving spouse to utilize any unused portion of the deceased spouse’s exemption.
For estates exceeding the exemption threshold, the tax rate is progressive. It starts at 18% on estates with a taxable value of up to $10,000 and gradually increases to 40% on estates with a taxable value of $1 million or more.
Minimizing estate taxes
It’s important for estate planners to consider strategies to minimize the taxable estate. One of these is lifetime gifting and charitable donations, which allow you to gift up to $18,000 per recipient per year without affecting your lifetime exemption.
Other strategies, such as using irrevocable trusts, might also be viable. Working with someone familiar with your situation is beneficial since they can help you determine what options will work best for your goals.