Taxes imposed on inheritances and estates have generally shrunk both at the federal and state levels in recent years, and there will be substantial additional relief for some taxpayers when the Ohio Estate Tax disappears from the books altogether on January 1, 2013. In the meantime, however, existing estate taxes remain in effect.
The following summary of Ohio estate tax regulations is derived from state publications, forms and websites, but does not address all particular situations taxpayers face. There are many considerations to take into account when estate planning, and the assistance of a professional advisor is recommended.
A graduated Ohio Estate Tax replaced the Ohio Inheritance Tax in 1968, and has been revised numerous times in the interim. The state levies a tax on the net value of an estate, which it defines as “the value of all property in which the decedent had an interest on the date of death” minus allowable deductions.
Assets which are covered by the tax include Ohio real estate and bank accounts, stocks, tangible property (such as vehicles and home furnishings), trust assets, business interests and life insurance proceeds that are payable to the estate.
Allowable deductions include funeral expenses, unreimbursed medical expenses, real estate mortgages, casualty and theft losses, real estate taxes, income taxes, utilities, charitable contributions and administrative costs such as executor, attorney, appraisal, probate and court fees.
A provision known as the marital transfer allows a surviving spouse to claim a deduction equal to the net value of an estate. This eliminates any federal or state taxes due on estates transferred between spouses, provided both are U.S. citizens. In effect, this recognizes the spouses as a single financial entity and defers the imposition of estate taxes until the death of the second spouse.
Although the state’s estate tax was marked for erasure by the 129th Ohio General Assembly when it passed HB 153, the estates of Ohioans who passed away in 2011, and those who die during 2012, are still taxable. The state outlines three scenarios for those estates.
Estates with a net value below $338,333 are not taxed, and there is no requirement to file any state tax statements on these estates.
Estates with a net value between $338,333 and $500,000 must be reported and are subject to a tax rate of $13,900 plus 6 percent of the total in excess of $338,333.
Estates with a net value in excess of $500,000 must be reported and are subject to a tax rate of $23,600 plus 7 percent of the total in excess of $500,000.
Estate executors and administrators are responsible for filing all pertinent tax documents within 15 months of a death. However, interest on any taxes that are due begins to accrue nine months after the date of death.
Executors file their required paperwork with the County Probate Court, and tax payments are made to the County Auditor’s Office. The most common estate tax forms are ET Form 2 (Ohio Estate Tax Return), ET Form 5 (Filing Notice) and ET Form 22 (Certificate of Estate Tax).
Ohio law calls for the local government to receive 80 percent of estate taxes, and the remaining 20 percent goes into the State General Revenue Fund.
In some cases, estates may also be liable to pay Ohio income taxes and/or school district estate taxes. There is also an Ohio Nonresident Estate Tax, which applies to whatever portion of a non-resident’s estate is located in Ohio.
More information and related publications and forms are available on the Internet from the State of Ohio at www.tax.ohio.gov. The phone number to call for individual taxpayer assistance is 800-282-1780.