Oregon Estate Tax Planning Overview

While the rather high ($5 million) current federal estate tax exemption amount means that very few estates will owe federal estate taxes in 2012 and 2013, the much lower $1 million Oregon estate tax exemption amount means that many more estates will owe Oregon estate taxes in the coming years.  In my own practice, I have frequently encountered  estates in the $1-2 million range owing Oregon taxes that could have been avoided with proper estate tax planning.

Effective January 1, 2012, the current “Oregon Inheritance Tax” will be renamed the “Oregon Estate Tax,” and the present byzantine rate structure will thankfully be simplified.  Estates in excess of $1 million will be subject to a variable tax rate of 10-16%, with highest 16% marginal tax rate kicking in at $9.5 million.  Without tax planning, a single person with a $2 million estate may owe about $102,500 in Oregon estate taxes.

Basic estate tax planning strategies may address two important goals:

  1. Doubling the exemption amount.  For married couples, tax planning may ensure that each spouse can use his/her exemption amount when assets eventually pass to children or other beneficiaries.  The principle technique my law firm uses in this area is the disclaimer credit shelter trust.  For a $2 million estate, proper use of a disclaimer credit shelter trust could save a married couple over $100,000 in Oregon estate taxes.
  2. Reducing the size of a taxable estate.  Gifts during your lifetime may reduce the size of your taxable estate.  A life insurance trust can move life insurance benefits outside of your taxable estate by transferring ownership of the life insurance policy.  A charitable remainder trust may allow you to preserve income from assets while avoiding future estate taxes on those assets.  Charitable giving can reduce or eliminate estate taxation, while allowing you to contribute to causes you believe in.

The estate planning team at Hillsboro Law Group PC provides affordable estate tax planning solutions for Oregon families. Consistent with our general philosophy, our estate tax planning services are priced to offer great value for our clients.

Consider also that, in January 2013, the federal estate tax exemption amount is scheduled to fall down to $1 million, with a huge 55% tax on amounts in excess of $1 million. Given the uncertain political climate in Washington, I believe that there is a real possibility that Congress may deadlock on the estate tax, and massive federal estate taxes could be imposed in 2013 on unprepared Americans.

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