Estate planning and retirement goals were discussed in the last fact sheet. Ideally, an estate plan maximizes all goals, but the reality is that most have limited resources. Therefore, most have to prioritize. In order to assist you in prioritizing, the costs of estate planning will be discussed at this point. Depending on the size of your estate and the complexity of your wishes, it is possible that your estate plan could be carried out through only a simple will. For others with larger estates, there might be a need for more detailed estate plans. But for many people, especially those who do not have to be concerned about federal estate tax or the care of disabled dependents, estate planning is very simple and straightforward. Let's investigate the costs of estate planning so you can determine if saving estate settlement costs is worth your time and effort.
Estate Settlement Costs
Costs of Dying |
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Funeral
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Gravestone and cemetery plot
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Medical expenses
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Administrative Costs |
Estate Tax |
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| Executor fees | Ohio | ||
| Attorney fees | Federal | ||
| Appraisal fees | |||
| Probate court fees | |||
| Accountant fees | |||
Estate settlement costs consist of costs of dying, administrative costs, and taxes. For smaller estates, the cost of dying and the administration of the estate might be more costly than estate taxes. Costs of dying include funeral expenses ($3,500–$10,000), a gravestone and cemetery plot ($1,000+), and medical costs ($1,000+).
Some medical costs might be covered by insurance. Administrative costs are paperwork costs to transfer property when someone dies.
Administrative Costs
Executor Fees
If property is transferred through the probate process, an executor is named to administer the will. If there is no will, an administrator is appointed by probate court. If probate is avoided by a funded living trust, the trust is still directed by another person, but with a trust, a trustee directs the assets while they are in trust.
An executor or administrator is entitled to a statutory fee, even though the fee is often waived. The statutory fee in Ohio is 4% of the first $100,000, 3% of the next $300,000, and 2% of probate assets over $400,000. Also, there is a statutory fee of 1% for real estate not sold, and a statutory fee of 1% for some assets not passing through probate. In cases where extraordinary services are required, the executor may apply for additional fees. A spouse who is an executor usually waives the executor fee, and a child often takes less than the statutory fee or no fee at all. Even if the fee is accepted, most heirs do not object to these fees, because the executor is often an heir. However, many who have been an executor of an estate will tell you that even the statutory executor's fee is not enough to compensate for the responsibility and expectations placed on the executor's shoulders. If all the heirs are also the executors, it is generally advantageous to waive the fee because executor fees are subject to income tax while assets passing to heirs are not.
Attorney Fees
An attorney needs to be involved in estate settlement to ensure that property is transferred properly, titles are valid, tax forms are properly submitted, etc. The Ohio Supreme Court has indicated that attorney fees have to be reasonable, and that probate court in many (but not all) Ohio counties must set a percentage fee schedule of reasonable attorney charges for settling an estate. This fee schedule is different from county to county. Typically, the attorney can apply for additional fees for extraordinary services. For example, in some counties, preparing a federal estate tax return is considered an extraordinary service. You should discuss fees with your attorney before asking him or her to settle your estate.
Some attorneys charge not by a percentage, but by the hour. The hourly rate might seem exorbitant, but these fees also cover the attorney's overhead expenses such as secretarial and legal aid expenses, office rent, computers, etc. Also, attorney fees assessed by the hour in most cases turn out to be less than those calculated as a percentage of the estate, especially for larger estates. In general, with an attorney that charges by the hour, the fees will be lower if you do more and the attorney does less. The time you spend in understanding estate planning, estimating the size of your estate, and prioritizing your goals might reduce the hours spent by your attorney. However, most attorneys in more rural counties charge by a percent of the estate. Attorney charges can be estimated by figuring 1.5% of the estate for larger estates, 3% of the estate for smaller estates, but no less than $1,000 no matter how small the estate. Do not hesitate to shop around for an attorney with whom you feel comfortable, trust, and want to handle your estate. Ask friends, interview attorneys, check the Ohio State Bar Association certified specialist lists, or scout out other attorney rating services to find the right attorney for you.
If a living trust is funded to avoid probate, attorneys 1) create the trust; 2) transfer property titles and deeds into and eventually back out of the trust; 3) file estate tax forms; and 4) dissolve the trust. Fees for all these functions should be established prior to entering into such an arrangement. This is the case with living trusts, as it could be quite some time between trust creation and dissolution. Also with trusts, it might be to a family's advantage to work with the same attorney or firm through the whole process. Attorney fees could be higher than necessary if different firms perform the above functions.
Appraisal Fees
Appraisal fees are paid to an appraiser who is recognized by probate court. The fees usually range from $100 to $5,000, but can sometimes cost even more. The amount charged for appraisal depends on the amount of property to be appraised, the difficulty of the appraisal, and who does the appraisal. An appraisal is necessary to establish the value assigned to assets for tax purposes, to calculate fees based on the value of the estate, and to equitably distribute the appropriate portion of the estate to each heir. An appraisal might be necessary even if no property passes through probate, as the value of both probate and nonprobate property is needed to fill out estate tax forms.
A provision exists for electing to value farm property according to its value for farming both for Ohio and federal estate tax purposes. Federal election requires an additional appraisal to calculate the value for farm purposes. However, it might not be to an heir's advantage for inherited property to be valued lower than the market value for federal estate tax purposes. A market valuation might be desirable for an heir who plans to sell appreciated assets after inheritance. The higher the appraisal, the higher the basis will be stepped up upon inheritance. Then, if and when the assets are sold, there will be less capital gain and less income tax.
Probate Court Fees
The term probate costs is often misused to indicate the sum total of estate settlement costs. Used properly, the term refers to the fees and costs charged by probate court. Probate court costs range from $200 to $500. When the term probate costs is used in place of the term estate settlement costs, some assume that by avoiding probate most of the costs of settling an estate will be avoided. This is simply not true.
Living trusts have been promoted to avoid probate, in many cases with scare tactics about the cost of probate. If a living trust is used to avoid probate, it has to be created and funded before death, and only property made subject to the trust will avoid probate. Checkbooks, bank accounts, car titles, property titles, deeds, etc., need to be changed so that they are owned by the trustee of the trust. This means checks will be written by the trustee. If you are the trustee, there is no significant difference from an individual account. Remember, an attorney should help write the trust document, transfer property into the trust, fill out estate tax forms, and transfer property back out of the trust in order to dissolve the trust. Creating a trust might help to avoid probate, but it might be just as expensive as going through the traditional probate process.
In later fact sheets we'll discuss other tools that avoid probate without going to the expense of a trust. If real property is held in several states and/or countries in a manner that does not avoid probate, the estate settlement process is more complicated and expensive, as property in each state or country needs to go through a similar and often duplicate process.
Taxes
The most discussed of the estate settlement costs are estate taxes, which consist of state and federal taxes.
Ohio Estate Tax
Ohio repealed its estate tax for dates of death on or after January 1, 2013. For deaths prior to that time, Ohio estate taxes are presented in Table 1. The table gives the rate schedule for Ohio estate taxes. After calculating the appropriate tax, Ohio provides a credit of $13,900, which exempts approximately $338,334 from Ohio estate tax for deaths prior to January 1, 2013.
Life insurance owned by the deceased but with a named beneficiary other than the estate is not currently included in the calculation of Ohio estate taxes, but it is included in one's estate for federal estate tax purposes. For federal estate taxes, life insurance proceeds are included in estate tax calculations unless 1) there is a beneficiary other than the deceased, and 2) the deceased did not own any interest in the policy. For example, the deceased owned the policy if he or she made the premium payments and had the right to change the beneficiary.
Another difference between Ohio and federal tax treatment is that for Ohio, annual gifts in excess of $10,000 to one person are considered in estate tax calculations only if made within three years of death. However with federal estate taxes, all gifts in excess of the annual exclusion ($13,000 per year per person in 2009 through 2012) impact estate tax calculations, even if made prior to three years of death.
| Table 1. Ohio Estate Taxes | |
| Taxable Estate | Tax |
| First $40,000 | 2% |
| $ 40,001–$100,000 | $ 800 + 3% over $ 40,000 |
| $100,001–$200,000 | $ 2,600 + 4% over $100,000 |
| $200,001–$300,000 | $ 6,600 + 5% over $200,000 |
| $300,001–$500,000 | $11,600 + 6% over $300,000 |
| Over $500,000 | $23,600 + 7% over $500,000 |
Federal Estate and Gift Tax
To comply with federal gift tax regulations, if gifts aggregating over $13,000 to one person in any calendar year are given no matter how long prior to death, your estate is required to file a gift tax form. However, each person can give $13,000 annually, tax-free, to each of as many different individuals as they have assets and desire to give, without filing the gift tax form. This amount is indexed with inflation in $1,000 increments, so it might take several years at current inflation levels between increases.
Individuals can also give any dollar amount (even more than $13,000 per year per person) to others if the gifts are direct payments to educational or medical institutions. For example, if a grandfather pays for a granddaughter's tuition bills (even if they exceed $13,000 per year) or a son's hospital bills (even if over $13,000) and the payments are made directly to the institution, no gift tax form is required.
Also, as long as the recipient spouse is a U.S. citizen, spouses can gift unlimited amounts to each other during their lifetime without filing a gift tax form. If the recipient spouse is not a U.S. citizen, the annual exclusion to that spouse is $133,000 in 2012 and is indexed for inflation.
In addition, the federal government has what is called a unified credit, or applicable exclusion amount. The exclusion amount can be used to offset federal gift or inheritance taxes. One can use the exclusion before death to offset gift tax that otherwise would be due on gifts over $13,000 per person per year. This is not always bad. A case where this might be advantageous is where property is appreciating very rapidly. Where this is the case, the use of the exclusion with a gift during life will likely transfer more property free of estate taxes, due to future appreciation of the property occurring outside of the estate. However, any of the exclusion used to offset gift taxes before death will no longer be available to reduce or eliminate federal estate taxes when it is time to settle the estate. From 2004 through 2010, the exclusion amounts were not completely unified. While the estate tax exclusion amount increased, the exclusion for federal gift tax purposes remained at $1,000,000. For 2011 and 2012, the exclusion amounts are again unified at $5,000,000 in 2011 and $5,120,000 in 2012.
To clarify how the exclusion and gifting might affect income taxes, consider the following example. Mrs. Jones is a widow who gifts $75,000 in one year to each of two single grandsons. The exclusion available to reduce estate taxes will then be reduced by $124,000. This is calculated as follows: Each gift is for $75,000, but there is a $13,000 annual exclusion in each year for each person. Therefore, the taxable gift is as follows: $75,000 – $13,000 = $62,000. Because there are two gifts, multiply $62,000 by 2, which equals $124,000.
Before the gifts, Mrs. Jones had enough exclusion to offset assets in her taxable estate at her death up to $5,120,000 in value in 2012. After the gifts, Mrs. Jones has exclusion left to offset only $4,996,000 ($5,120,000 – $124,000). If the exemption amount decreases back to $1,000,000 in 2013, Mrs. Jones will only have $876,000 remaining exclusion.
Therefore, when it is stated that the exclusion offsets estate taxes on estates totaling up to $5,120,000, it is assumed that no gifts were made during one's lifetime that exceeded the annual exclusion of $13,000 per year per person (or lower amounts in prior years.)
Some credits are available for federal estate taxes that do not apply to Ohio estate tax. First, credit is due on federal estate tax for some of the Ohio estate taxes. This credit will not be available from 2005 through 2013. Credit might also be due on federal estate taxes if the same property was in a recently settled estate and estate taxes were paid recently. Last, credit for estate tax paid in other countries might reduce federal estate taxes.
Increased emphasis on the cost of taxes is warranted for estates over approximately $5,120,000 for estates to be settled in 2012; however, in 2013, the size of estate subject to federal estate tax goes to $1,000,000. When an estate is large enough to be subject to federal estate tax, the tax rate begins at 35% and increases to 55% depending on the year of death. In 2012, the maximum estate tax rate is 35%. Both Ohio and federal estate taxes are payable nine months from the date of death, but there are elections to allow fifteen years to pay the taxes in specific situations. Ohio and federal estate taxes are calculated differently, but for both, debts, funeral expenses, costs of administering the estate, money or property willed to charity, and money or property willed to most surviving spouses are deducted from the gross estate before figuring taxes.
If you are confused by the discussion of estate settlement costs, don't worry. That's why attorneys normally do this planning. Also, the next section estimates estate settlement costs by the use of three examples.
Estate Tax Calculations for Couples
This section compares estate settlement costs in three scenarios (see Tables 2–4). The following estimates of estate settlement costs are simplified for better understanding. Your team of estate planning professionals is best qualified to estimate the costs of settling your estate.
The following assumptions are made for estimating the estate settlement costs in Tables 2–4:
- After the death of the first spouse, the surviving spouse uses up assets at the inflation rate, so the dollar value of assets held by the surviving spouse stays constant or increases only at the rate of indexation for federal estate tax purposes. The exclusion amount that transfers to the surviving spouse under the new portability rules is not indexed for inflation; therefore, in large estates, the savings with trusts will be greater if there is any appreciation in value.
- The costs of dying (funeral, burial, and medical costs) are not included in the calculations.
- The spouses have equally sized estates.
- Attorney fees are increasingly based on an hourly basis instead of a percentage basis.
- The calculations assume that the executor will not take the statutory fee, since doing so will create taxable income. Also, most surviving family members who are named executor do not take this fee. Even if taken, the money still generally goes to heirs.
- The assets pass through probate rather than in another manner, such as Payable on Death (POD), Transfer on Death (TOD), or other beneficiary designation.
- The calculations assume that any trust used for the estate tax exclusion amounts does not qualify for the marital deduction for Ohio estate tax purposes.
The examples in this section (Tables 2–4) consider the estate settlement costs of a married couple who have a combined estate of various amounts, with each owning half of the assets. In each Table, there is a comparison of the expected estate taxes and costs for variously sized estates. Each Table compares the cost if the first spouse to die wills all his or her assets to the surviving spouse with what might be expected with planning to make use of estate tax exclusion amounts for the first spouse to die. To simplify the comparison, no additional expenses associated with a trust or life estate are included. Further, with proper planning, you might be able to reduce estate settlement expenses even more than is illustrated.
The use of trusts plus other strategies that will reduce the size of the taxable estate might be used to reduce total estate settlement costs. Splitting estates with the first spouse's estate going to the next generation (directly, through a trust, or by life estate) rather than to the other spouse reduces settlement costs most significantly in Table 4 in the event the federal estate tax laws revert to prior law in 2013. It does this in two ways. First, in the estate of the surviving spouse, a lower percentage tax rate is charged for estate taxes because the estate is smaller, with a progressive tax rate. Federal estate taxes might be averted completely for a couple with combined estates less than $10,240,000 in 2012 or $2,000,000 in 2013. This amount might be higher if the estate is able to qualify to elect to value farm property at its agricultural use value. Second, the assets in the first estate that are not passed on to the surviving spouse are assessed settlement costs only once. Assets passing to the surviving spouse might be assessed estate settlement costs twice.
Even though splitting estates with all or a portion of the first spouse's estate going to the children might save settlement costs, there are disadvantages. First, especially in small estates, at least some of the funds are gone that would have otherwise been available to support the second spouse the rest of his or her years, unless a trust is used. For couples with lower net worth, the surviving spouse might need all the assets for living expenses and retirement. A trust can be created so that assets are preserved, and earnings from assets go to the surviving spouse. In addition, trusts are often drafted so that some of the principal is available to the surviving spouse in certain circumstances. However, all assets might need to be available for the support of the surviving spouse, especially in smaller estates. The assets worth $2,000,000 could be willed to the children directly, be directed to them through a trust (with perhaps the surviving spouse given income from the trust), or go eventually to them through a life estate granted to the surviving spouse (with the children having remainder rights). However, to simplify the comparison, no additional expenses associated with a trust or life estate are included in Tables 2–4. Further, with proper planning, you might be able to reduce estate settlement expenses even more than is illustrated.
An additional disadvantage to splitting estates between spouses is that estate planning becomes more complicated. Splitting estates and trust creation requires increased planning and increased attorney time and fees during your lifetime. However, with proper planning, attorney fees at death can be reduced. These fees are not reflected in the cost savings depicted. For some, particularly smaller estates, the increased time and trouble might not be worth the cost savings.
The examples in this section point out a simple tax-planning strategy available for couples. In these examples, the second person to die is assumed to be single when her/his estate is settled.
The costs for the second spouse to die (or for a single person) are often higher. This is due to the lack of a marital deduction for those single or widowed. However, surviving spouses and other singles are not without tools to reduce estate taxes. Singles and surviving spouses do have fewer options, some of which are discussed in future fact sheets.
Those couples with estates of $10,240,000 or more ($5,120,000 for singles) in 2012 (or $1,000,000 in 2013 for both singles and couples) need to do some planning to avoid federal estate taxes. Those with estates less than $1,000,000 might have the luxury of doing very little estate planning.
In smaller estates, the attorney fees, Ohio estate taxes, and costs of dying are the major components of settlement costs. Probate court fees and appraisal fees are relatively small, even in smaller estates.
The costs of dying could be drastically reduced or paid for prior to death. Medical expense is often covered by medical insurance. Cremation is increasingly popular, and greatly reduces burial expenses. Funeral expenses can also be minimized.
As indicated before, the executor is often an heir who frequently reduces or does not accept executor fees. However, attorney fees and Ohio estate taxes might be of concern, as they make up the majority of the estate settlement costs for estates less than $2,000,000. If concerned about attorney fees, do the following:
- Organize your thoughts, goals, and objectives before approaching prospective attorneys.
- Inventory your assets, categorize them as "husband," "wife," and/or "both" (if you have a spouse), and then value them.
- Know the concepts of a basic estate plan.
- Confer with and shop for an attorney who will do quality work. Find someone who will charge by the hour or charge a fee lower than the maximum allowed if you go to him or her prepared. Establish fees before you commit to working with an attorney. If you are knowledgeable and organized, a lower attorney fee might be charged. If the attorney works by the hour, it should take fewer hours if you are more prepared. However, make sure your work is organized, legible, and correct. Check with your attorney as to what information is needed, and as to the format in which it is needed. Time spent by you does not ensure that the attorney will need to spend less time or charge less, especially if the information is incorrect or presented in a confusing format.
Ohio estate taxes are also a significant portion of estate settlement costs. Table 1 in this fact sheet gives the rate schedule with rates starting at 2% and increasing to a maximum of 7% for taxable estates over $500,000. Estate taxes (both Ohio and federal) have a progressive rate schedule. The larger the taxable estate, the higher percentage of tax assessed.
This concludes this fact sheet. The Tables herein should not be used to estimate estate costs, as the examples are too simplistic. The estimates are presented only to give you an idea of the possible cost savings for variously sized estates. Only you can decide how much effort you wish to put into saving estate settlement costs. The next fact sheet will focus on property ownership and the determination of income tax basis.
| Table 2. Total Cost of Settling Both Spouses' Estates 2012 (with Ohio Estate Tax) With First to Die Owning 1/2 and Surviving Spouse Owning 1/2 |
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| Estate Size | First to Die Wills All Assets to Survivor | First to Die Wills All Assets to Children (outside probate directly or through trust) | Estate Cost Savings with Assets Passing to Trust or Children |
| $500,000 | $16,624 (3.3%) | $2,000 (0.4%) | $14,624 (2.9%) |
| $1,000,000 | $55,263 (5.5%) | $26,111 (2.6%) | $29,152 (2.9%) |
| $10,000,000 | $723,390 (7.2%) | $673,245 (6.7%) | $50,145 (0.5%) |
| $15,000,000 | $2,420,949 (16.1%) | $2,346,965 (15.6%) | $73,984 (0.5%) |
| Table 3. Total Cost of Settling Both Spouses' Estates 2013 and After, Assuming Federal Exemption Remains at Current Levels (no Ohio Estate Tax) With First to Die Owning 1/2 and Surviving Spouse Owning 1/2 |
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| Estate Size | First to Die Wills All Assets to Survivor | First to Die Wills All Assets to Children (outside probate directly or through trust) | Estate Cost Savings with Assets Passing to Trust or Children |
| $500,000 | $7,200 (1.4%) | $2,000 (0.4%) | $5,200 (1.0%) |
| $1,000,000 | $11,000 (1.1%) | $4,000 (0.4%) | $7,000 (0.7%) |
| $10,000,000 | $51,000 (0.5%) | $25,640 (0.25%) | $23,360 (0.25%) |
| $15,000,000 | $1,673,863 (11.1%) | $1,614,591 (10.7%) | $59,272 (0.4%) |
| Table 4. Total Cost of Settling Both Spouses' Estates 2013 and After, Assuming Federal Exemption Drops to Prior Law (no Ohio Estate Tax) With First to Die Owning 1/2 and Surviving Spouse Owning 1/2 |
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| Estate Size | First to Die Wills All Assets to Survivor | First to Die Wills All Assets to Children (outside probate directly or through trust) | Estate Cost Savings with Assets Passing to Trust or Children |
| $500,000 | $7,200 (1.4%) | $2,000 (0.4%) | $5,200 (1.0%) |
| $1,000,000 | $11,000 (1.1%) | $4,000 (0.4%) | $7,000 (0.7%) |
| $10,000,000 | $4,827,850 (48.3%) | $4,267,563 (42.7%) | $560,287 (5.6%) |
| $15,000,000 | $7,851,350 (52.3%) | $7,215,056 (48.1%) | $636,294 (4.2%) |
These fact sheets should in no manner be considered as a replacement for consulting with estate planning professionals, nor should the general principles in these fact sheets be applied to specific situations without consulting with an attorney.
Your Response
Fact Sheet 2
1. Do you know which attorney might work with your estate? Does this attorney charge by the hour or by a percentage of the estate?
__________ by the hour __________ by a percentage of the estate
2. Have you or are you willing to shop for an attorney? Yes No
3. What is your attorney's estimate of estate settlement costs for your estate and for attorney fees? $____________________
4. Have you discussed with your executor which attorney will handle your estate? Yes No
5. Estimate the Ohio estate tax that will be due when your estate is settled: $ ____________________
6. Is your estate—or the combined estate of you and your spouse—near or above $1,000,000? Yes No
If so, you might be subject to federal estate tax and need to do some estate tax planning now, unless you have already done so. You will want to follow actions taken by Congress.
7. If married, Tables 2, 3, and 4 in this fact sheet will give you a rough idea of the cost of settling your and your spouse's estate in various scenarios. What are your approximate total estate settlement costs? (Round up to the next highest value.) $____________________
8. Can you do the simple planning of having half of the total estate (that of the first to die) pass to heirs (either through a trust or directly)? Yes No
9. If you can and have not done so already, is the cost savings worth doing so? Yes No
Answers
Fact Sheet 2
1. Do you know which attorney might work with your estate? Does this attorney charge by the hour or by a percentage of the estate?
__________ by the hour __________ by a percentage of the estate
The first and most important step to starting your estate plan is to select an attorney. Many attorneys offer a free initial consultation so that you can decide if you wish to work with him or her and vice versa. If you are concerned about attorney fees, the initial consultation is the time to address the topic. Attorney fees are a significant part of total estate settlement fees, especially for smaller estates.
Attorneys charge by the hour or by a percentage of the estate. If you and the attorney work well together and you are able to organize your thoughts, figures, and papers so that the attorney's hours are decreased, his or her fees might be less if charged by the hour. Also, many attorneys do not charge the maximum allowed by the probate judge in their county.
2. Have you or are you willing to shop for an attorney? Yes No
Shopping for professional services is becoming increasingly more acceptable. Attorneys are not able to advertise, so shopping for an attorney is somewhat difficult. Most people want quality service and expertise for the best price. Important considerations in your selection process should include recommendations from other professionals and friends. Also consider whether a free initial consultation is available, and think about how well you can work with the attorney.
3. What is your attorney's estimate of estate settlement costs for your estate and for attorney fees? $____________________
The Tables in this fact sheet should not be used to estimate the costs of settling your estate. The purpose of the examples in this fact sheet are to help you decide if the various expenses are large enough to be of concern to you. Estimates of the estate settlement costs for your estate should be made by members of your professional estate planning team.
4. Have you discussed with your executor which attorney will handle your estate? Yes No
An attorney plays a central role upon one's death. Your executor needs to know many things, including which attorney you have worked with in developing your estate plan. In many cases, one's will is kept at his or her attorney's office, so make sure your executor knows who your attorney is.
5. Estimate the Ohio estate tax that will be due when your estate is settled: $ ____________________
Table 1 in this fact sheet can be used to estimate Ohio estate tax if the size of the estate is known. Note that Ohio estate taxes will be eliminated for deaths in 2013 and after, so this is likely of concern only for those currently ill or feeble.
6. Is your estate—or the combined estate of you and your spouse—near or above $1,000,000? Yes No
If so, you might be subject to federal estate tax and need to do some estate tax planning now, unless you have already done so. You will want to follow actions taken by Congress.
Recall that the estate tax with the highest rate is federal estate tax. If you are married, have a combined estate of over $1,000,000, and the federal exclusion amount drops to $1,000,000 in 2013, an estate plan is imperative, but the planning is relatively straightforward. However, if you are a surviving spouse or are single and your estate is over $1,000,000, the development of your estate plan will likely be more challenging for your estate planning team.
7. If married, Tables 2, 3, and 4 in this fact sheet will give you a rough idea of the cost of settling your and your spouse's estate in various scenarios. What are your approximate total estate settlement costs? (Round up to the next highest value.) $____________________
Recall that the estimates in Tables 2–4 assume that the first spouse to die owns half of the assets, with the other spouse owning half of the assets before the first spouse dies. In column two, all assets are willed to the surviving spouse, so that spouse owns all assets at his or her death. However, the third column assumes that the first spouse transfers some of the assets to the children (or other heirs) directly or through a trust, leaving fewer assets to be passed onto heirs upon the second spouse's death. The third column has lower estate costs because the first to die's share is assessed only once. Also, on larger estates, the second to die's share is assessed at a lower rate, being half as large. Consider these estimates to be only ballpark figures when determining whether your estate settlement costs are large enough for further planning.
8. Can you do the simple planning of having half of the total estate (that of the first to die) pass to heirs (either through a trust or directly)? Yes No
Those who are single cannot use this planning. Those with small estates and with only social security likely cannot use this planning, as all of the combined estate will likely be needed to support the surviving spouse. However, those with larger estates where both spouses have adequate pensions can use this simple plan.
9. If you can and have not done so already, is the cost savings worth doing so? Yes No
If you answered yes, don't wait. Estate planning is important for reasons other than expense savings. For example, estate planning is very important if you wish to do nursing home planning. In this case, five years (after making gifts) is required before applying for Medicaid.
Contact James C. Skeeles at skeeles.1@osu.edu.
Contact Russell N. Cunningham at rcunningham@ohiocounsel.com.