One of the main goals of estate planning in Ohio should be to take advantage of those strategies that will help one to minimize the liabilities against their estate. That way they preserve as many of their personal assets as possible to pass on to their beneficiaries.
Yet many may think that one particular liability is impossible to avoid: estate taxes. Yet that may not be the case. Ohio does not impose a local estate tax on its residents. This means that the only potential tax liability one has to plan for comes from the federal level. By optimizing certain tax avoidance strategies, however, one might even avoid that.
Understand the federal estate tax exemption
First and foremost, one should know that a federal estate tax exemption amount exists, meaning that those estates whose total taxable value comes in under that amount will not be subject to tax. Per the Motley Fool, the exemption amount for 2020 is $11.58 million. This elevated amount means that very few estates may end up owing taxes at all.
Yet through the proper planning, those whose estates approach that amount may be able to extend that exemption amount even further.
Estate tax portability
The process of estate tax portability allows one’s spouse to claim their unused estate tax exemption amount after their death. If one decides to leave their entire estate to their spouse, that amount passes tax-free thanks to the unlimited marital deduction (thus preserving their entire estate tax exemption). Their spouse can then claim that unused exemption, effectively extending their own exemption amount to $23.16 million.
The Internal Revenue Service states that in order to claim portability, one need only file an estate tax return stating that intention within nine months of their spouse’s death.