Estate planning is often something people put off. It can be uncomfortable to think about what happens after you die, particularly when you are focused on running a business, raising a family, or enjoying retirement.
But there are two things in life that are inevitable: death and taxes.
For Oregon residents, those two issues can intersect in ways many families do not expect.
Estate Tax
Oregon estate tax generally applies when a decedent’s gross estate exceeds $1 million.. It is the lowest estate tax threshold in the nation and has remained unchanged since 2002.
The value of your estate for tax purposes is the fair market value of all bank accounts, investments, retirement accounts, your house, vintage cars, and ownership in the family business on the day that you die.
Above the $1 million threshold, your estate is taxed at 10-16%. Many families now clear $1 million simply with a house and 401k, it doesn’t only apply to those perceived as ultra-wealthy.
What Happens When You Die?
Estate tax is paid by the estate before assets are distributed to beneficiaries.
For families with significant assets, this can create an unexpected financial obligation. And unlike a bank account, some assets, particularly real estate, businesses, and other closely held investments, may not be easy to convert to cash.
Without advance planning, heirs may be forced to sell family property, liquidate investments, or borrow against business assets to generate the cash needed to pay the tax.
Agricultural Families Have Additional Planning Opportunities
Oregon provides a special estate tax exemption for qualifying natural resource property used in family farm, forestry, or fishing businesses.
Under current law, up to $15 million of qualifying property may be excluded from the value of your estate up, but specific requirements must be met. Those requirements include ownership timeline and how the property is used, both before and after death.
Done correctly, this exemption is an incredible benefit for ag families who often have a sizable portion of their estate tied up in farming property.
It is also a good example of why estate planning should begin well before a transfer occurs. Meeting the requirements may take years of planning and documentation.
Planning Is About More Than Paying Tax
Estate planning is ultimately about making sure your assets are transferred according to your wishes while minimizing unnecessary tax and administrative burdens.
That may involve trusts, gifting strategies, business succession planning, beneficiary designations, life insurance, or other strategies depending on your circumstances.
The right approach is different for every family.
Next Steps
Review your estate plan if it hasn’t been reviewed since any major life changes. Marriage or divorce, the birth of a child, starting a business, buying property, and receiving an inheritance are just a few examples. Contact the Capstone Accounting & Tax team to review your potential Oregon estate tax exposure and identify planning opportunities.
We work with families and business owners to coordinate tax planning with their broader estate and succession goals.
