What is the Difference Between Inheritance Tax and Estate Tax?
Inheritance tax and estate tax could both potentially be required after a death occurs, depending upon the value of the estate and on the laws in the state where property is owned and passed on to new owners. Estate and inheritance taxes can impose a significant financial burden and can result in the government receiving thousands or even millions of dollars after a death. If you or your family will be subject to estate or inheritance tax, you need to make certain that you understand the law and explore your options for avoiding taxes or reducing the amount due.
Zimmer Law Firm can provide assistance with understanding the rules for estate and inheritance taxes. Our Cincinnati estate tax planning lawyers know the ins and outs of both inheritance tax laws and estate tax laws. We can help you to work within the law to minimize your tax liability and protect those who stand to inherit. Give us a call today to find out more.
What is the Difference Between Estate Tax and Inheritance Tax?
Estate tax and inheritance tax can both be triggered when property is transferred after a death, but the two taxes work differently.
Estate tax is calculated based on the value of the estate that the deceased person left behind. State laws can differ on exactly how large an estate has to be before it is subject to estate tax.
An estate tax is paid by the estate of the person who passed away. In other words, money and property is taken from the estate of the deceased to pay taxes. Typically, there is an amount that can pass which is exempt and if the estate is below this amount, no estate tax is charged. The amount of tax due also usually rises as the estate gets bigger. However, money and property can also usually pass on to a spouse without estate tax.
Inheritance tax, on the other hand, is tax on an inheritance that is received. The federal government does not charge an inheritance tax, and very few other states do. When an inheritance tax is charged, it is not paid by the estate of the person who passed away. Instead, the individual who inherits is required to pay the tax. Just like with the estate tax, an inheritance tax is not typically charged if assets are left to a spouse. There may also be other situations where no tax is charged, as long as the money is left to a close relative.
What are the Inheritance Tax and Estate Tax Rules in Ohio
According to the Ohio Department of Taxation, the estate tax was repealed within the state. For any death that happened after January 1, 2013, there is no longer estate tax charged. There is also no inheritance tax within the state of Ohio. The fact that there are no estate or inheritance taxes is great for those who inherit and for people who own property in Ohio that they want to leave to loved ones. People already pay taxes as they earn income and buy assets, and it is not fair that they should be taxed again when they pass away.
Unfortunately, just because there is no state tax on an inheritance or on an estate does not mean that people in Ohio never have to worry about the government wanting a piece of an inheritance. If your estate is large enough, you could be taxed by the federal government.
The federal government does have an estate tax, which is assessed as of 2017 on estates that exceed $5.45 million. While this may seem like a lot of money, many people with businesses, Ohio farms, or family homes that have been in their family for a long time could end up with estate taxes being assessed. This can pose a problem if there is not enough cash for the estate to pay the tax without selling assets. The possibility the estate won’t have enough liquid cash to pay taxes is one of many reasons why it is important to talk with a lawyer for tax planning advice related to estate and legacy issues.
Getting Help from An Ohio Estate Tax Planning Lawyer
Zimmer Law Firm can provide comprehensive help with understanding the rules for estate tax and inheritance tax. We can can explain to you when or if you will be subject to tax, and can work with you to do everything possible within the bounds of the law to limit the tax that must be paid.
To find out more about how an Ohio estate tax planning lawyer can assist you, give us a call at 513.721.1513 today.