On December 17, 2010, President Obama signed in to law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which among other things increased the federal estate tax credit to $5,000,000 per person, and also once again reunited the estate and gift tax credits such that an individual could gift $5,000,000 during his or her lifetime and pay no federal gift tax and/or transfer $5,000,000 at his or her death and pay no estate tax (or some combination of the two). A more detailed outline was the subject of a memorandum issued by this office earlier this year. If you would like a copy of such memorandum, please notify us and we will be pleased to forward one to your attention.
Somewhat following in line, on June 30, 2011 Governor Kasich signed in to law legislation which, among other things, repeals the Ohio estate tax for the estates of persons who die on or after January 1, 2013. The Ohio estate tax is levied on the estates of Ohio residents based on the value of the taxable estate. Currently and through December 31, 2012, generally all property in which the decedent owned or maintained an interest in as of his or her death was taxable for Ohio estate tax purposes. This gross taxable estate was thereafter reduced by various available deductions and an Ohio estate tax credit of $338,333. For estates over $338,333 but less than $500,000 the applicable tax rate was 6%, and for estates in excess of $500,000 the applicable tax rate was 7%. Therefore, while Ohio had a relatively modest state estate tax credit, its applicable tax rate was also relatively modest.
This repeal is good news for many who would perhaps remain residents of Ohio were it not for the prospect of Ohio estate tax. It is also good news for our farming and small business people who traditionally realized the brunt of the Ohio estate tax system. Please note that this may present a planning opportunity for married couples who currently have traditional credit shelter type trusts (also known as A/B trusts). Once the Ohio estate tax is repealed, the provisions of the B Trust may become more flexible and allow for beneficiaries other than the spouse. This may further allow us to focus moreso on elder law issues than estate tax issues. This is because the credit shelter trust, if funded, will no longer need to qualify for marital deduction for Ohio estate tax purposes.
We would encourage you to contact us to schedule an appointment to review your existing estate plan and what changes and/or revisions may be appropriate given this most recent modification of state estate tax laws.