Ohio Estate tax requirements are burdensome and can sometimes result in significant hardship for families. This is especially true if you have a family farm. Your farm should be your legacy and future generations should be able to work the land just as you did, and as did generations before you. Unfortunately, if proper steps are not taken to protect the farm, estate taxes could have serious consequences.
Zimmer Law Firm can help you to understand how Ohio estate taxes could affect your farmland and your family’s legacy. Our legal team will also help you to explore ways to reduce or avoid the taxation that could affect ongoing farm operations. Call today to speak with an estate tax planning attorney to find out more.
How Ohio Estate Taxes Could Destroy Your Farm
Estate taxes are assessed by the federal government. There also used to be an estate tax in Ohio, however the Ohio Department of Taxation indicates that the estate tax was repealed effective 2013. Now, for farmers in Ohio, the big concern is federal tax. According to the IRS, estate tax is assessed once an estate’s value exceeds $5.45 million. This number changes, but this is the current excludable amount as of 2016.
While this seems like a lot of money, it isn’t for farmers who are land rich but who do not have a lot of cash. The Washington Post addressed this problem in an article entitled: Is the estate tax killing small farms and businesses? Many farmers were interviewed who indicated the value of land had risen after the land had been in the family for generations. The land would be worth a lot of money now, if it was sold off, which means a farmer’s estate could easily have more than $5.45 million in land and equipment.
Unfortunately, just because the IRS says that a farmer owes taxes on an estate valued at more than $5.45 million (due to land which is worth a lot) does not mean the farmer’s heirs have the money to pay for the tax bill. Most farmers don’t have tons of cash sitting in the bank that they pass on to heirs to pay the taxes that are due.
A lot of farmers who were profiled in the Washington Post article indicate that they have been forced to sell their family farms, or at least to sell hundreds of acres of land, just to generate enough money when the farm passes to the next generation. One farmer said their family was already required to sell 120 acres to pay estate taxes when his wife’s grandmother died in 1988.
There is a special valuation use which can allow for the reduction in the value of a gross estate if land is farmed for 10 years after the death occurs and if the family doesn’t permit cash rent leasing and participates in farm management. There are also options to repay the tax due over 15 years.
Still, the fact remains that farmers are still taxed on land and often forced to sell at least some acreage just because a death has happened. You do not want to put your farm at risk due to Ohio estate tax rules, and should talk with an attorney about ways to protect your farm.
Protecting Your Farm and Avoiding Estate Taxes
There are different options to try to protect your farm and ensure it is not in jeopardy just because you pass away and your heirs inherit. Some people will purchase life insurance policies so the proceeds from the death benefit can be used to generate the cash to repay estate taxes. Unfortunately, this option can be costly and it still means paying a big tax bill.
You can also create a comprehensive estate plan in which you manipulate the structure of farm ownership or the way in which the farm passes to heirs in order to try to avoid estate taxes. The use of legal tools like trusts could be helpful. Spouses can also make provisions for one spouse to leave the entirety of his or her estate to the other, since gifts to spouses aren’t taxable. The last surviving spouse will have his or her own $5.45 million estate tax exemption, plus the deceased spouse’s tax exemption since the exemption is transferrable. This means $10.9 million can be transferred without tax.
Getting Legal Help from an Ohio Estate Tax Lawyer
Zimmer Law Firm understands the rules for Ohio estate taxes and knows how to help farm owners take steps to protect their land. To learn more about the ways in which we can help, give us a call at 513.721.1513.