By Associate Attorney Keith Stevens
“If an estate goes through probate, how much taxes do we pay?”
“So if we avoid probate, then we don't have to pay taxes, right?”
While these questions reflect the normal concern about after-death expenses, they also combine two entirely different issues into one. Let's untangle these issues.
First, probate may be necessary even when no estate taxes are due and, on the flip side, estate taxes may be due even when there is no need for probate. This is because these two expenses are for different things.
A probate proceeding is the judicial oversight of the administration of a decedent's estate in order to ensure that creditors are paid, the beneficiaries are protected, and the decedent's wishes are upheld. To this end, and depending on the size of the estate, the court may charge hundreds to thousands of dollars of filing fees and imposes expensive requirements on the estate, such as having real estate and other valuable property appraised. However, the real expenses with probate, money-wise, are in the fees that attorneys charge to guide an executor through the probate process, which can cost as little as a few hundred dollars for single small asset to much more for the entire estate itself.
If your assets are not properly protected against probate, a single car or bank account could spend months in limbo before it is available to your beneficiaries, regardless of the value.
The estate tax, meanwhile, is leveled against a decedent's estate if it exceeds a certain value. It serves as a “transfer” tax, a tax on wealth being transferred to the next generation. While Ohio got rid of the estate tax effective January 1st, 2013, there is no guarantee that it won't come back. Further, the federal estate tax still remains, to tax those with an estate larger than $5.25 million (as of 2013). If an asset is in your estate (i.e., you earned it or own it and haven't purposefully gifted it away), then it is countable toward that exemption.
Even if all your assets avoid probate court, they are still subject to the estate tax.
These two after-death expenses do not intermingle (except to the extent that an Ohio estate tax return is filed with the probate court), so probate protection and tax planning are two separate beasts often that require different approaches. If you want to learn more about how to minimize the after-death expenses for your beneficiaries, contact an estate planning attorney at Cooper, Adel & Associates for more information.
DISCLAIMER – Every case is different because every case is different. This blog does not give legal advice. This blog does not create an attorney client relationship. You are not permitted to rely on anything in this blog for any reason. This blog is an entirely personal endeavor. Every person’s situation is different and requires an attorney to review the situation personally with you.
No attorney-client relationship is created by this site.
The use of the Internet, this blog or email for communication with this firm or any individual member of this firm does not establish an attorney-client relationship. Before we represent any client, the client and the attorney will sign a written retainer agreement.
If you do not have a written, signed retainer agreement with us, we are not representing you and will not be taking any action on your behalf.