Do you own a horse? If so, there are extra steps you must take to ensure all horses is transferred properly upon death.
There are three critical concerns related to the transfer of a horse upon death:
- Will the horse be transferred?
- Will the horse be transferred through Probate?
- Will the horse generate Estate Tax?
Will the horse be transferred?
Determining whether your horse will be transferred is a question of how you own the horse and what protocols are in place if you are deceased.
If you maintain your horse at your home, there will need to be a succession plan in place to cover who will care for your equine. If your horse is not on your property, there will need to be a protocol in place to ensure any past due boarding fees are paid. If your family is unaware of the horse or boarding location, it is possible the horse would be sold at auction to repay in past due boarding costs.
If your family can locate your horse, and pay past-due boarding costs in time, the horse can be transferred. But that is not the end of the story.
Will the horse be transferred through Probate?
First, why would someone want to avoid the Probate process? It takes time (in some cases more than a year) to complete Probate administration. In addition, you want to hire an attorney, pay legal costs and court costs (which could be significant), creditors can make a claim against the assets, and all of the information is in the public domain.
Will your horse have to pass through Probate? Yes, unless you have a Trust. If you own a horse, you need a Trust to avoid Probate.
Like most states, Ohio categorizes a horse as tangible personal property. By default, all your tangible personal property goes through Probate at death. That is unless you create a Trust prior to death and assign ownership of your horse to the Trust.
A properly drafted and funded Trust will avoid Probate upon death and provide you with more control over the distribution process. You can assign funds to specifically care for the horse. This can include detailed instructions for your Trustee on where your horse is located, boarding costs, and other important details.
Will the horse generate Estate Tax?
Yes, unless your total estate is worth less than the estate tax exemption amount. What is the estate tax exemption? Currently, this is a tricky question.
As of May 2022, if your assets are less than $12.06 million at the time of death, it is unlikely you would owe Estate Tax on your horse (if you are married, multiple that number times two). The current law is scheduled to sunset in 2025, likely reverting to between $5 – $7 million.
Here is a link to some other articles on this topic related to Estate Tax Planning.
- Secure Act and Estate Planning Tax Law Changes for 2020
- Gifting Taxes and Trust Estate Planning
- Opening Probate in Ohio
- Does a Transfer on Death designation solve everything?
- Ohio Probate Claims and Statutes of Limitations Summary
- Irrevocable Trust Reformations and Terminations
- Estate Tax Planning: SLAT, GRAT, & IDGT
- Summary of Key Estate Planning Tools
- What happens to your business after you die?
- Estate Planning and Cryptocurrency
- Estate Tax Update