Fortunately, the Ohio Bar Association, through its Section on Estate Planning, Probate and Trust Law (of which I’m a member) works hard at trying to keep Ohio up-to-date with respect to laws affecting estate planning. Two pieces of current pending legislation are noteworthy:
Senate Bill 117 – This Bill contains several changes, most notably the adoption of the Uniform Durable Powers of Attorney Act and the statutory ability to allow a trustee of an irrevocable trust to modify, or “decant,” the terms of an irrevocable trust when necessary to respond to tax changes, improve trust terms or other matters. This decanting power is incredibly useful and will be a welcome change for those who know how to take full advantage of its many technical requirements.
HB 3 (and Budget) – Repeal of the Ohio Estate Tax. Ohio currently taxes estates with value exceeding $338,333. The rate is 6% on the amount above $338,333 to $500,000 and 7% on the amount in excess of $500,000. Repeal of the tax will not only reduce the tax burden on Ohio estates, it will also increase the flexibility available to estate plans. This is because the excess over $338,333 was often allocated to a marital deduction trust limiting distributions only to a surviving spouse and requiring the distribution of all income annually to qualify for the Ohio estate tax marital deduction and prevent Ohio estate tax when one spouse died. This is a significant limitation given significantly higher Federal Estate Tax Exemptions such as the current $5 million exemption. If Ohio repeals its estate tax, the entire Federal Exemption amount can pass to a Credit Shelter or “Bypass” trust instead of a restrictive marital trust. The surviving spouse can still be a beneficiary, but the class of beneficiaries can be expanded to children and grandchildren and because there is not required income distribution the trust can continue to grow free of estate tax.
Both Bills are likely to pass. If they do, it will be important to revisit estate plans.
For a more comprehensive review of pending legislation, download my “Ohio Legislative Update – May, 2011.”