Taxes are often the last thing on someone’s mind when they’re thinking about their future death. Family members who have recently lost someone also focus more on their emotional responses and the practical consequences of losing a loved one rather than the possible tax obligations that may arise as a result of that individual’s passing.
With that – very understandably – said, both those planning to leave resources for the people they love and those expecting to inherit from an estate generally need to understand what taxes may apply after someone dies. Some tax obligations, like income taxes, carry over from someone’s life. Others arise as a result of their death.
Ohio doesn’t collect state estate taxes
Some individual states impose a tax on large estates worth a certain amount of money or the assets inherited by individuals that live in the state. The good news for those planning an estate in Ohio or who recently lost a loved one who lived in the Buckeye State is that the state does not impose either an estate tax or an inheritance tax.
Neither the individuals receiving money from the estate nor the executor administering it will have to retain funds to pay taxes based on the value of assets transferred in most cases. However, multi-million-dollar estates could still be subject to federal estate taxes. If the total value of the estate is over the federal exemption limit, then there may be taxes due to the federal government. In 2023, only estates worth more than $12,920,000 will have to worry about estate taxes. The more an estate exceeds that limit, the higher the tax rate. In some cases, as much as 40% of the property in someone’s name when they die will go directly to the federal government.
Advance planning is often the only solution
In a scenario where federal estate taxes may apply, a thorough estate plan will typically be the only means of minimizing that liability. If someone has not diminished their personal holdings or transferred assets to a trust when they die, neither their executor nor their beneficiaries will typically be able to make the moves necessary to eliminate tax liabilities after their death.
Learning more about the taxes and other financial obligations that arise during estate administration may help those who are planning for the future or anticipating an inheritance. Seeking legal guidance is generally a good place to start.