Oregon’s estate tax only applies to the decedent’s wealth on the date of death. ORS 118.010. And Oregon has no gift tax. Thus, if assets are given away before death, by even one day, the tax is zero. But gifts can backfire. Here’s why. Continue reading
Now that the federal estate tax exemption has increased to $5M per spouse, and is “portable,” death taxes are of less concern to family business owners. (“Portable” means that the unused exemption from the first spouse to die may be used by the surviving spouse, which effectively creates a $10M exemption for married couples.) Although Oregon and Washington still have an estate tax (with exemptions of $1M and $2M per spouse, respectively), the state death tax bill should not force the sale of the business.
General Overview. For the last 20 years, variations of the A/B Trust have been the cornerstone of estate tax planning for married couples. In a nutshell, the A/B Trust structure prevents all or a portion of the wealth from the first spouse to die from being included in the surviving spouse’s estate — even though she has the use of the money for the rest of her life.
Oregon’s estate tax laws have a loophole: If you make sufficient gifts during life to reduce your estate below $1M, you will avoid paying any Oregon estate tax at death. For example, if you have $8M of wealth and give away $7M the day before you die, your Oregon estate tax will be zero. [This does not work for federal estate tax purposes because lifetime gifts (in excess of $13,000/person/year) reduce the $5M lifetime exemption dollar-for-dollar.]