Estate Tax 101: Oregon and Federal Estate Tax.

It has been said (by me) that Oregon is the best state to live, but the worst state to die.  This article will discuss the Federal Estate Tax and the Oregon Estate Tax, which are both taxes that are levied on the transfer of assets from a deceased person to their beneficiaries. While the two taxes are similar in some ways, there are also important differences that you should be aware of.

Federal Estate Tax.

The Federal Estate Tax is a tax that is levied on the transfer of assets from a deceased person to their beneficiaries. The tax is based on the total value of the assets that are transferred, and it applies to estates that are worth more than a certain amount.

For deaths that occur in 2023, the Federal Estate Tax exemption is $12.92 million per person, up from $12.06 million in 2022. This means that if your estate is worth less than $12.92 million, your estate will not be subject to the Federal Estate Tax.

If your estate is worth more than $12.92 million, your estate will be subject to the Federal Estate Tax. The tax rate starts at 18% and goes up to 40%, depending on the value of the estate.

Marital Deduction and Portability.

One important aspect of the Federal Estate Tax is the marital deduction, which allows one spouse to transfer any amount of property to the other spouse tax-free, both during lifetime and at death. This can be an important tool for married couples who want to maximize the amount of assets that can pass to their heirs without being subject to estate taxes.

Another important feature of the Federal Estate Tax is portability, which allows a surviving spouse to use any unused portion of their deceased spouse's Federal Estate Tax exemption. This means that if one spouse dies with an estate that is worth less than the Federal Estate Tax exemption, the unused portion of their exemption can be transferred to the surviving spouse and used to reduce their estate tax liability.

Oregon Estate Tax.

The Oregon Estate Tax is similar to the Federal Estate Tax – it is a tax that is levied on the transfer of assets when an Oregon resident dies. The tax is based on the total value of the assets that are transferred.  These are some of the assets that are included for Oregon estate tax purposes:

• real estate;
• bank accounts;
• life insurance; and
• personal property

For deaths that occur in 2023, the Oregon Estate Tax exemption is $1 million per person. This means that if your estate is worth less than $1 million, your estate will not be subject to the Oregon Estate Tax.

If your estate is worth more than $1 million, your estate will be subject to the Oregon Estate Tax. The tax rate starts at 10% and goes up to 16%, depending on the value of the estate.

Annual Gifting to Reduce Estate Taxes 

The best way to reduce your taxable estate is by spending it!  Another strategy that can be used to reduce the estate tax liability (especially for Oregon residents) is gifting. The Federal Gift Tax for 2023 allows an individual to gift up to $17,000 per year to any individual without incurring any gift tax. This means that a married couple can gift up to $34,000 per year to any individual without incurring any gift tax.

If you have any questions about estate planning or estate taxes, please call our office to schedule a free consultation.  

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