Recent Blog Posts

As the 2026 deadline for the significant reduction in the federal estate tax exemption approaches, high net worth individuals and estate planning professionals are seeking effective strategies to mitigate potential tax burdens. One possible strategy is the Spousal Lifetime Access Trust (SLAT), a tool that can offer substantial tax advantages while providing financial security for spouses. Our latest bulletin, "Using Spousal Lifetime Access Trusts in Estate Plans", delves into SLATs, offering an explanation of their benefits, mechanisms, and considerations.

Understanding SLATs

A SLAT is an irrevocable trust designed to provide income to a beneficiary spouse while removing the principal assets from the donor spouse’s taxable estate. This strategy can significantly reduce estate taxes and ensure financial stability for the beneficiary spouse during their lifetime.  The following are some of the key components and characteristics of SLATs:

• Irrevocability: Once assets are transferred into a SLAT, the trust cannot be modified or revoked, and the assets cannot be returned to the donor spouse. This permanence is crucial for excluding the assets from the donor spouse's taxable estate.
• Trustee Management: A trustee, who can be the beneficiary spouse, another individual, or multiple co-trustees, manages the SLAT’s assets. The trustee’s role is to ensure that the assets are used according to the trust’s terms and in the best interests of the beneficiary spouse.
• Beneficiary Distributions: The beneficiary spouse receives income from the trust during their lifetime, providing ongoing financial support. Upon the beneficiary spouse’s death, the remaining trust assets are distributed to designated beneficiaries, such as the couple’s children, free of estate taxes.

Estate Tax Advantages of SLATs

SLATs offer two primary mechanisms for reducing estate taxes:

• Exclusion from Taxable Estates: Assets transferred to a SLAT are excluded from both the donor and beneficiary spouses’ taxable estates. This means that any future appreciation of these assets is not subject to estate taxes.
• Pre-Exemption Reduction Transfers: By transferring assets to a SLAT before the federal estate tax exemption is reduced, individuals can lock in the current higher exemption amount. Any value exceeding the new, lower exemption amount set for 2026 is not "clawed back" into the estate, providing significant tax benefits.

Practical Considerations

While SLATs offer substantial benefits, their effectiveness depends on careful planning and consideration of several factors:

• Appreciation of Transferred Assets: The strategy is most beneficial when the transferred assets are expected to appreciate in value, as the growth occurs outside the taxable estates.
• Exceeding the Exemption Amount: SLATs are particularly advantageous for individuals whose wealth exceeds the new estate tax exemption amount. Large transfers made before the reduction can result in significant tax savings.

Advantages and Disadvantages

Like most estate planning strategies, there are both advantages and disadvantages.  The advantages include:

• Exclusion from Estate: Assets transferred into a SLAT are not included in either spouse’s estate, protecting any appreciation in value from estate taxes.
• Lifetime Benefits: The beneficiary spouse can receive income and, in some cases, principal from the trust, providing financial support during their lifetime.
• Asset Protection: SLATs offer a level of protection from creditors, safeguarding the assets from potential claims against either spouse.

Disadvantages to consider are:

• Irrevocable Nature: The donor spouse loses control over the assets once they are transferred into the SLAT, which can be a drawback for individuals who prefer flexibility.
• Dependency on Spousal Relationship: The effectiveness of a SLAT is tied to the stability of the marriage. Divorce or the death of the beneficiary spouse can impact the donor spouse’s ability to benefit indirectly from the trust income.
• No Step-Up in Basis: Heirs do not receive a step-up in tax basis upon inheriting assets from a SLAT, potentially resulting in significant capital gains taxes.

Conclusion

The Spousal Lifetime Access Trust (SLAT) is a valuable estate planning tool that can help reduce estate taxes, especially in anticipation of the potential reduction in the federal estate tax exemption in 2026. While a SLAT is not suitable for everyone, it can be effective in specific situations, particularly for individuals with highly appreciating assets or those who can gift assets near the current federal estate tax exemption limit. Implementing a SLAT requires careful planning and close collaboration with legal and tax advisors. As always, consult with an experienced attorney and tax advisor to ensure that a SLAT aligns with your estate planning goals and complies with all relevant laws and regulations.

For more detailed information and practical insights, see the new bulletin, "Using Spousal Lifetime Access Trusts in Estate Plans" available at farmoffice.osu.edu.

Ohio Farm Custom Rates 2024

Barry Ward, Eric Richer, John Barker and Amanda Bennett, OSU Extension

Farming is a complex business and many Ohio farmers utilize outside assistance for specific farm-related work. This option is appealing for tasks requiring specialized equipment or technical expertise. Often, having someone else with specialized tools perform tasks is more cost effective and saves time. Farm work completed by others is often referred to as “custom farm work” or more simply, “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

Custom rates increased for the majority of field operations in 2024 as compared to surveyed rates in 2022 but the increases did vary by operation. Examples include an increase of 6% for Planting Corn (30 Inch Rows with Fertilizer Application), 5.6% for Harvesting Corn (Combine, Grain Cart, Haul Local to Farm), 21% for Spraying (Self-Propelled Sprayer, Crop Protection Chemicals) and 24% for Field Cultivator.

New field operations in this year’s survey and summary include drone/UAV application and cover crop seeding.

Ohio Farm Custom Rates

The “Ohio Farm Custom Rates 2024” publication reports custom rates based on a statewide survey of 333 farmers, custom operators, farm managers, and landowners conducted in 2024. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine, etc., and labor for the operation.

Some custom rates published in this study vary widely, possibly influenced by:

• Type or size of equipment used (e.g. 20-shank chisel plow versus a 9-shank)
• Size and shape of fields
• Condition of the crop (for harvesting operations)
• Skill level of labor
• Amount of labor needed in relation to the equipment capabilities
• Cost margin differences for full-time custom operators compared to farmers supplementing current income

Some custom rates reflect discounted rates as the parties involved have family or community relationships. Discounted rates may also occur when the custom work provider is attempting to strengthen a relationship to help secure the custom farmed land in a future purchase, cash rental or other rental agreement. Some providers charge differently because they are simply attempting to spread their fixed costs over more acreage to decrease fixed costs per acre and are willing to forgo complete cost recovery.

Charges may be added if the custom provider considers a job abnormal such as distance from the operator’s base location, difficulty of terrain, amount of product or labor involved with the operation, or other special requirements of the custom work customer.

The data from this survey are intended to show a representative farming industry cost for specified machines and operations in Ohio. As a custom farm work provider, the average rates reported in this publication may not cover your total costs for performing the custom service. As a customer, you may not be able to hire a custom service for the average rate published in this factsheet.

It is recommended that you calculate your own costs carefully before determining the custom rate to charge or pay. It may be helpful to compare the custom rates reported in this fact sheet with machinery costs calculated by economic engineering models available online. The following resources are available to help you calculate and consider the total costs of performing a given machinery operation.

• Farm Machinery Cost Estimates, available by searching University of Minnesota.

• Illinois Farm Management Handbook, available by searching University of Illinois farmdoc.

• Estimating Farm Machinery Costs, available by searching Iowa State University agriculture decision maker and machinery management.

Volatility in diesel price may sometimes cause concern for custom rate providers that seek to cover all or most of the costs associated with custom farm operations. The approximate price of diesel fuel during the survey period (January – April 2024) ranged from $3.20 - $3.50 per gallon for off-road (farm) usage. As a custom farm work provider, if you feel that your rate doesn’t capture your full costs due to fuel price increases you might consider a custom rate increase or fuel surcharge based on the increase in fuel costs.

The complete “Ohio Farm Custom Rates 2024” publication is available online at the Farm Office website:

https://farmoffice.osu.edu/farm-management/custom-rates-and-machinery-costs

Applying Ohio’s “agricultural exemption” from zoning is a constant challenge for county and township zoning officials. A township in Logan County faced that challenge when a landowner claimed its composting facility to be an agricultural land use that is exempt from township zoning authority.  After obtaining a composting permit from the Ohio EPA, the landowner established the compost facility, despite the township’s disagreement that the facility qualified for the “agricultural exemption.” 

When there is uncertainty about the meaning or application of a law such as the Logan County zoning situation, Ohio law allows a county prosecutor to request a legal opinion from the Ohio Attorney General (Ohio AG).  That’s exactly what the Logan County Prosecuting Attorney did, directing four questions to the Ohio AG that relate to how township zoning regulations, the agricultural exemption, and state permitting laws apply to the compost facility.  The Ohio AG’s resulting opinion offers helpful guidance for rural zoning officials who face the challenge of understanding whether a land use is an agricultural land use that is exempt from zoning. It also provides an explanation of the relationship between state issued permits and local zoning authority.

Here’s a summary of the Ohio AG’s response to the questions the Logan County prosecutor raised.

1. Is a compost facility considered “agriculture” that is exempt from township zoning under the agricultural exemption, and if not, is it subject to township zoning?  

Logan County didn’t receive a definitive answer to this question.  Instead, the Ohio AG explained that it does not have the authority to answer a question of fact.  It is the township zoning officials who must determine whether land is “agriculture” for purposes of the agricultural exemption, based upon the facts of the specific situation.  In doing so, the township may exercise its discretion and examine any factors necessary and relevant to making its decision, including the nature and character of all activities conducted on the land as well as activities to prepare an agricultural product that are not conducted on the land at issue, and the township’s decision is subject to judicial review.

The Ohio AG did, however, provide a useful summary of the agricultural exemption provisions in Ohio Revised Code sections 519.01 and 519.21, which apply to townships, as follows: 

• ORC 519.01 provides a definition of “agriculture” as “farming; ranching; algaculture meaning the farming of algae; aquaculture; apiculture; horticulture; viticulture; animal husbandry, including, but not limited to, the care and raising of livestock, equine, and fur-bearing animals; poultry husbandry and the production of poultry and poultry products; dairy production; the production of field crops, tobacco, fruits, vegetables, nursery stock, ornamental shrubs, ornamental trees, flowers, sod, or mushrooms; timber; pasturage; any combination of the foregoing; and the processing, drying, storage, and marketing of agricultural products when those activities are conducted in conjunction with, but are secondary to, such husbandry or production.” 
• The opinion explained that the terms “in conjunction with” and “secondary to” in the emphasized language above carry common meanings: “in conjunction with” means “occurring together” and “secondary to” means “of second rank, importance or value.” Because “composting” is not specifically listed in the agriculture definition, it must be done “in conjunction with” and “secondary to” the production of the agricultural products used for the composting.  The Ohio AG stated that, “If the composting facility is located on land that does not engage in agri-cultural activity, composts agricultural products that are not produced on its premises, or does not use the compost on its premises, then the composting facility is likely not “agriculture” pursuant to R.C. 519.01.”
• ORC 519.21(A) contains the limitation on power that is the agricultural exemption:  “the Revised Code confers no power on any township zoning commission, board of township trustees, or board of zoning appeals to prohibit the use of any land for agricultural purposes or the construction or use of buildings or structures incident to the use for agricultural purposes of the land on which such buildings or structures are located . . . and no zoning certificate shall be required for any such building or structure.” 
• The Ohio AG explained that taken together, ORC 519.01 and ORC 519.21(A) require that land on which the secondary agricultural activities of processing, drying, storage, and marketing of agricultural products occurs or land on which a building or structure is located must “be primarily used for an agricultural purpose to qualify for an exemption from the township zoning resolutions.” Conversely, agricultural activities that are merely an accommodation to a business are not “agriculture” under ORC 519.01 and could be regulated as a commercial use under township zoning regulations.

2. Can township zoning resolutions regulate composting facilities by considering such as a “conditional use” if the zoning resolution does not explicitly address composting as a permitted or conditional use? 

A simple explanation by the Ohio AG answered this question.  According to Ohio law, A township may only regulate a non-agriculture composting facility as a conditional use if the township zoning resolution includes composting or solid waste facilities as permitted conditional uses in the applicable zoning district.

3. What recourse does a township have if a composting facility claims to be exempt from zoning due to the agricultural exemption, even though composting is not included in the agricultural exemption statute? 

For a violation of a zoning resolution or a question regarding the interpretation of a township zoning resolution, the Ohio AG explained that a township may choose to utilize the remedies outlined in ORC 519.23 and ORC 519.24.  Those remedies include a criminal cause of action and fines or an action to enjoin or abate a violation.

4. Does a township have any recourse if the Ohio Environmental Protection Agency (Ohio EPA) issues a permit for a composting facility when a property owner failed to secure a local zoning permit?

In response to this question, the Ohio AG explained that while some laws do preempt local authority over a land use, the state solid waste laws do not “supersede the authority of a township to enact zoning regulations.”  This means that a township is not required to permit a facility simply because the Ohio EPA issues a permit for it. The Ohio AG concluded that if a township determines that a composting facility is not “agriculture” and not exempt from zoning under the agricultural exemption, that facility then would be subject to the township zoning regulations and Ohio EPA composting facility regulations.

Read Ohio Attorney General Opinion No. 2024-004 in the Opinions Database on the Ohio Attorney General’s website.

Those familiar with serving as an executor or navigating probate understand the daunting nature of the task. The process often entails numerous filings and can extend over several months or even years. Consequently, seeking legal counsel is frequently necessary to navigate this complex procedure and ensure the estate is managed appropriately. One common question concerning the engagement of attorneys for probate concerns their fees: what are their charges?

The Ohio Revised Code allows attorneys to receive "reasonable fees" for their services in aiding with estate matters. However, Ohio law doesn't offer a specific definition of what constitutes reasonable fees, nor does it prescribe a straightforward formula for determining them. Ultimately, it falls upon the county probate judge to decide whether an attorney's fees are reasonable for overseeing estate administration. Given the potentially burdensome task of assessing fees for each estate, many county probate courts set standardized rates that estate attorneys can charge, thereby streamlining the process.

The probate rates vary from county to county but generally range from 1% - 5% of the total value of the estate.  As an example, the following are the probate rates for Brown County, Ohio:

            For all personal property:

                        5.5% on the first $50,0000;

                        4.5% for $50,000 - $100,000;

                        3.5% for $100,000 - $400,000;

                        2.0% above $400,000.

            For real estate:

                        1% for all real estate transferred to a spouse;

                        2% on the first $200,000 transferred to a non-spouse;

                        1% over $200,000 transferred to a non-spouse.

Let's examine the potential probate fees for a medium-sized farm located in Brown County. This farm comprises $1,000,000 worth of real estate, $500,000 of machinery, $300,000 in crops/livestock, and $200,000 in savings/investments. Under these circumstances, an attorney could charge up to $37,500 in legal fees, which would be automatically approved by the probate court.

Probate fees work well for smaller/simpler estates. In fact, attorneys are sometimes justified in asking for more than the county rates to cover their fees. However, for farm estates, especially with significant real estate, the county probate rates can cause permissible legal fees to become very high.  For example, a large farm estate in Brown County with $5 million of land and $2 million of equipment/crops/livestock would result in permissible legal fees of $97,500.

To tackle the issue of high legal fees in farm estates, two strategies can be employed. Firstly, opting out of using the county rates to determine legal fees can be beneficial. The county rates represent the maximum fees that the court will approve but are not obligatory for attorneys to charge. For farm estates, billing on an hourly basis often leads to substantially lower legal fees compared to using the county rates. Therefore, when engaging an attorney for estate assistance, inquire about their estimated fees based on both the county rates and an hourly basis. If the hourly rate proves to be less expensive than the county rates, simply proceed with hiring the attorney based on their hourly rate. It's crucial to recognize that you always retain the option to request an attorney to bill on an hourly basis instead of using the county rates.

The second option is to avoid probate.  The same $5 million dollars of land that can cost $50,000 to probate can be transferred for a few hundred dollars using a transfer on death affidavit.  It is relatively easy to transfer any titled asset outside of probate.  Bank accounts, investments, vehicles and business entities can all be transferred using transfer on death or payable on death designations.  Especially for financial accounts, an attorney may not even be needed to transfer the asset to the beneficiaries.  Let’s consider this point using an example:

Farmer owns $5 million of land and $2 million of equipment and crops in Brown County, Ohio.  As already provided above, county probate rates would allow legal fees for probating the estate to be up to $97,500.  Before death, Farmer executes a transfer on death affidavit transferring his land at death to his children.  Farmer also sets up a single-member LLC for his farming operation and transfers his equipment and crops into the LLC.  He then makes his LLC ownership transfer on death to his children.  Now, when Farmer dies, his $7 million of assets can be transferred outside of probate with only a minimal amount of paperwork needed. 

By spending perhaps a few thousand dollars on a transfer on death affidavit, an LLC and minor paperwork at death, Farmer can save his heirs up to $97,500.  Avoiding probate is a great way to minimize legal fees for an estate. For more information on avoiding probate, see the Legal Tools for Avoiding Probate bulletin available at farmoffice.osu.edu.

Farm estates are not obligated to adhere to the county probate rates. In fact, it's possible to title many, if not all, assets in a manner that bypasses probate altogether. For assets that do undergo probate, it's advisable to inquire with the estate attorney about the fees based on both the county rates and an hourly rate. While some extensive and intricate farm estates may still incur substantial legal fees even if probate is avoided and hourly rates are applied, for many farm estates, the legal fees could be significantly lower than those dictated by the county rates.