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Estate Planning: Ohio Estate Tax Savings Trust

These case studies, while based on actual client experiences, are intended for illustration purposes only. They should not be used as a basis for determining a course of action in any other case. The options demonstrated herein should be considered only after consultation with an experienced elder law attorney: the laws are constantly changing and, in addition, a seemingly similar situation may be subject to a drastically different result due to minor factual differences not apparent from these illustrations (in fact, more favorable options may be available due to these variables.)

Estate Planning: Ohio Estate Tax Savings Trust

Over the last few years there have been major changes in the Federal Estate Tax that have made the tax much less of a concern to the average family. Currently the Federal Estate Tax is only due when the total estate size of a decedent is over $2 million. However, there is less awareness of the Ohio Estate Tax. Under current law, Ohio Estate Tax is levied on all estates over $338,334. The tax rate is 6% for estates under $500,000 and 7% for estates of $500,000. Clearly, this tax can apply to many more individuals and families.

Donald and Martha had an estate of $700,000 that consisted of a home worth $100,000, $400,000 in back accounts and CDs, and $200,000 in mutual funds. When they came into our office they had wills that provided that upon the death of the first of them, all assets would pass to the survivor and upon the second death they would pass to the two children. Under this plan, there would be no Ohio Estate Tax on the first death, but $23,700 would be due upon the death of the survivor.

We set up an Ohio Estate Tax A-B Trust for Donald and Martha. The trust provided that an Ohio B-Trust would be set up upon the first death. Upon Martha’s death, we put $338,334 into the B-Trust. Martha’s death resulted in tax due of $0. A few years later when Donald passed away, the Ohio Estate Tax bill resulting from his death was $1,400. This saved $22,300 for Donald and Martha’s children rather then writing a check to the State of Ohio.