Gift and Estate Tax Analysis

Federal and Oregon Estate Tax Analysis

I’m not rich. Do I need to think about death taxes?

Many people in Oregon are surprised to learn that they have an estate that would be subject to the Oregon death tax if they were to pass away. Oregon’s death tax, which is called the Oregon Estate Transfer Tax, comes into play if an individual passes away with $1,000,000 in assets, including proceeds from life insurance policies, retirement accounts, real estate, and any other property. If taxes are imposed, the tax rate is 10%-16% depending on the total amount of assets owned by the estate.

What about federal death taxes? When should I be concerned about this?

For 2017, the estate and gift tax exemption is $5.49 million per individual, up from $5.45 million in 2016. That means an individual can leave $5.49 million to heirs and pay no federal estate or gift tax. A married couple will be able to shield just shy of $11 million ($10.98 million) from federal estate and gift taxes with proper planning. The annual gift exclusion remains at $14,000 for 2017. If taxes are imposed, the tax rate is 40% at the federal level.

The federal estate and gift tax exemptions rise with inflation.

When should I meet with an attorney to talk about my exposure to the death tax?

If you are close to $1,000,000 in total assets, you should consider meeting with an attorney to discuss how to best plan to minimize your exposure to this tax. This is true regardless of whether you are married.

How do I prepare for an appointment with an attorney?

If you have a substantial estate, you should consider the consequences of leaving a large sum of money to your children. If you intend to only benefit your children, calculate how much your children would earn annually from passive income. In other words, if you leave each of your children $1,000,000 and the assets are invested to receive a 5% annual return, then your children can do nothing and earn $50,000 annually. You have to decide if you are OK with this, knowing your children.

If you’ve previously filed any gift tax returns, it is important to provide these to us at your appointment.

You should put together an asset schedule so that we know an estimate of the taxes that would be due upon your death without any planning. We also need to have an estimate of the taxes that would be due so that you can purchase appropriate life insurance to pay for the taxes that will be due.