Death And Estate Tax Planning

When your loved one passes away or you yourself are preparing for the inevitable future, it is hard to succumb to reality- death comes with a cost. One of those costs that far too commonly burdens families and loved ones is the Estate Tax, or as some call it, the Death tax.

This tax is generally based on the value of the decedent’s estate at the time of death. The Estate Tax is paid by the estate before distributions are made to beneficiaries. Unlike incomes taxes, due to the complex rules and higher levels of liability, estate tax returns are usually prepared by your attorney and not your CPA.

Many shudder at the negative connotation that comes with the word “tax.” In reality, though, there are a variety of strategies that can result in significant estate tax savings for your family if used properly. This is why it is pertinent to have an experienced Ohio elder law attorney at your side when either planning for the event of the estate tax or during the aftermath with your family.

Federal Estate Tax

The Federal Estate Tax will continue to be a political football. In the last 5 years alone, the tax has been phased out, repealed, reinstated, and made permanent with annual adjustments for inflation. Seemingly every budget debate contains rhetoric proposing to do everything from reducing the exemption amount to $1 million dollars to permanently repealing the tax entirely.

Effective January 1, 2014, the Federal Estate Tax exemption amount is $5.34 million dollars. This means that any “estate” valued less than $5.34 million dollars is not subject to the tax, while an estate greater than that amount is subject to the tax. The current tax rate is 40% of the excess.

However, even if your estate is less than $5.34 million dollars, there are several important planning considerations to take into account. These are some considerations you may want to bring up with your Ohio estate planning attorney.


In 2011, the IRS introduced the concept of portability. This allows a surviving spouse to get credit for the unused portion of the deceased spouse’s exemption amount under certain circumstances. This is done by filing a federal estate tax return at the death of the first spouse, even if one is not otherwise required. This allows the survivor to benefit from a potential $10.64 million exemption amount which can vastly reduce the amount of estate tax that would be owed. Portability can also be employed to insulate the estate from potential future changes in the estate tax.

Federal Gift Tax

In 1977, Congress created the Unified Gift and Estate Tax System that effectively combined the Gift Tax and the Estate Tax. What this means is that the value of your estate for the purposes of the Federal Estate Tax includes not only the value of assets under your control at the time of death but also the value of all reportable gifts made over your lifetime.

Reportable Gifts

There are two important numbers to remember when it comes to the topic of gift tax: 1) The annual exclusion amount and (2) the lifetime exemption amount.
Current law states that gifts exceeding $14,000 per beneficiary, per year must be reported to the IRS on an annual basis (Form 709). This is known as the annual exclusion amount and is only a reporting requirement. Annual gifts less than $14,000 are excluded from this reporting requirement.

Gift tax is not owed until the total value of gifts made in excess of the annual exclusion amount exceed the lifetime exemption amount, which is currently $5.34 million dollars. By law, the lifetime gift exemption amount and the estate tax exemption amount are the same.

So it is important to remember that reportable gifts also count against your estate tax exclusion amount.

Ohio Estate Tax

Ohio repealed the Ohio Estate Tax as of January 1, 2013. Will it be permanent? That is anyone’s guess, but for now, there will be no Ohio Estate Tax in the future. Ohio Estate Tax may STILL BE DUE for those who died prior to January 1, 2013 if the value of their estate at death plus any gifts made within three years of death was greater than $338,333.

As you can see, Estate taxes and all that accompany them are quite complicated and change quite a bit. At Cooper, Adel & Associates, we make it our goal to find the best solution for you and your family in regards to taxes and other charges at the event of a family death. Be sure to contact one of our offices today for more information and to schedule your free consultation.