Deciding Which Estate Tax Planning Techniques Are Most Beneficial

Estate tax and inheritance tax are not the same. Estate taxes are imposed upon the assets and property of a recently deceased person and are paid by the estate. Inheritance taxes are charged to the beneficiaries of an estate.

In addition to the important differences between the kinds of taxes that can be imposed upon a person’s death, there are also various federal and state laws that govern these matters. Estate tax planning techniques can be quite complex, and the most beneficial strategies for a specific situation can change when related laws are amended. 

For West Virginia (WV), Kentucky (KY), and Ohio (OH) residents planning for the future, an attorney who is licensed and experienced in these states will be best-equipped to help you evaluate the best options to minimize estate taxes.

What You Need to Know about Federal Estate Tax Laws

Filing and paying federal estate taxes is required only for individuals with a significant amount of wealth. For persons who pass away in 2019, estate taxes will be assessed only if the taxable estate exceeds $11,400,000, estate taxes. The taxable estate is the sum of all assets—including cash, securities, real property, trusts and annuities, insurance, business interests, and other property—minus debt and eligible expenses. 

It is important to note that taxable gifts over many years can also be included in the value of your estate for federal tax purposes. Portability is another notable factor for those whose assets meet the threshold for federal estate taxes; the exemption for federal estate taxes is portable to a surviving spouse, which means any exempted amount not claimed by the first deceased of a married couple can be applied to the estate of the surviving spouse upon his or her death.

State Tax Laws: WV, KY, and OH Tax and Estate Planning

Estate tax laws in WV and OH no longer impose any tax liability on estates or inheritance, though federal requirements still apply. Additionally, if you inherit assets from a state that does require payment of estate taxes, you may be subject to a tax on the property in that state.

The KY estate tax has also been eliminated, but the Bluegrass State does still impose an inheritance tax. Beneficiaries of property and assets in Kentucky may be subject to this tax. The state categorizes beneficiaries in three classes: A, B, and C.

Class A beneficiaries include spouses, parents, children, grandchildren, and full- or half-siblings. These individuals are exempt and not required to pay inheritance tax in KY. 

Full- or half-nieces and nephews, daughters- or sons-in-law, aunts, uncles, and great-grandchildren are class B beneficiaries. This group receives a $1,000 exemption and pays inheritance taxes at a rate of between four and 16 percent. All other beneficiaries are designated as class C and pay a tax rate of six to 16 percent with a $500 exemption. Deductions to the taxable amount can be granted for some funeral expenses, professional fees, and debts incurred related to the estate.

Estate Tax Planning Techniques to Minimize Estate Taxes

There are many options to consider in order to minimize estate taxes if your estate is expected to be subject to filing and payment. Strategies for WV, KY, and OH tax and estate planning include but are not limited to the following:

• Life insurance and life insurance trusts

• Trusts of various kinds;

• Charitable trusts and donations;

• Family limited liability companies (LLCs) or family limited partnerships (FLPs);

• Gifts;

• Education account contributions—to 529 plans, for example; and

• Spending on non-countable assets

Specific legal and financial requirements and limitations generally apply to any estate tax planning techniques. If you wish to minimize estate taxes, you should seek the counsel of an attorney who understands the requirements and estate tax laws in WV, KY, OH, and beyond. Anna M. Price of Jenkins Fenstermaker, PLLC has the experience you need and the compassion you want in an estate planning attorney. You can contact Anna by calling (866) 617-4736 or completing the firm’s online contact form.