In addition to the federal estate tax, Oregon has its own estate tax. However, Oregon does not have an inheritance tax. Keep reading to learn more about Oregon’s inheritance laws, wills, probate and tips on estate planning. Estate planning is a complicated topic, so it’s a good idea to work with an estate planning attorney and financial professional to guide you through the process. If you do not already work with an attorney or financial advisor, give me a call and I can help.
Does Oregon Have an Inheritance Tax or Estate Tax?
The good news is that Oregon does not have an inheritance tax. However, many people will need to consider Oregon’s estate tax, especially those who own real property. For deaths that occurred on or after Jan. 1, 2012, estates with a gross value of $1 million or more must file an Oregon estate tax return (Form OR706). Keep in mind, it is still possible that no estate tax will be charged for some estates due to applicable tax deductions and exemptions.
The estate tax in Oregon is a graduated rate. It starts at 10% and goes up to 16%. The amount the estate is taxed depends on how much the estate is worth after the $1 million exemption and any other exemptions are taken.
If you have any questions or concerns about estate taxes or taxes in general, contact your CPA or tax professional. If you would like help finding a tax person, please give me a call.
What About Federal Estate Taxes?
For most people, the federal estate tax will not be a concern. An estate must be worth more than $11.18 million before federal estate tax comes into play. In addition, the federal government does not have an inheritance tax.
Other Tax Filings To Keep In Mind
When a person dies, there are several federal and estate tax situations that need to be addressed by the family. Besides the state estate tax, here are some additional tax items to look for:
- Final individual federal and state income tax returns – due by tax day of the year following a person’s death. State tax returns and payment are due 9 months after death. Oregon does allow for a 6-month extension to file your tax return, but it does not extend your time to pay. The state only grants extensions to pay under special circumstances as identified by OAR 150-118-0150.
- Federal estate or trust income tax return – due by April 15 of the year after the person’s death.
- Federal estate tax return – due 9 months after the person’s death. A 6-month extension is available if asked for before the end of the nine-month period
- Again, this only applies to estates that have a gross value of more than $11.4 million.
The Internal Revenue Service requires each estate to have its own employer identification number (EIN) to represent itself in any tax-related matters. To apply for an EIN, visit the IRS website or apply by fax or mail.
Is There A Valid Will?
In Oregon, a will must be in writing, signed by the testator or by some other person at the testator’s direction and in his or her presence, and attested by two or more competent witnesses (ORS 112.235). A will does not need to be notarized. However, if you notarize, it will help the probate process.
With or without a will, the next step is probate. With a will, an individual is nominated at personal representative (executor) of the estate. Without a will, someone must volunteer, usually a close family member or spouse. Either way, the personal representative must be appointed by the Court before taking full control over the estate. Once appointed, the personal representative has the legal authority to gather estate assets, pay taxes and bills and, lastly, distribute the property to the devisees or heirs.
That is the simplified version of the probate process. Of course, there are many more steps and legalities that need to be completed during probate, so if you have any questions about probate, please give me a call.
For those who have small estates, Oregon offers a simplified probate process, the Small Estate Affidavit. Small estates in Oregon are defined as those where the fair market value of the estate is $275,000 or less, and not more than $75,000 of the estate is personal property and not more than $200,000 is real estate. If an estate meets these requirements, the heir or heirs of the estate can file a Small Estate Affidavit with the Court. The filed Affidavit will allow the personal representative or affiant to distribute the assets without needing to go through a full probate process.
- Consider talking to an attorney and/or financial advisor about estate planning.
- Speak with a CPA or tax professional about all tax questions.
- Estate planning and taxes can be extremely complicated with terms and language you may not be familiar with. Please contact me if you have any questions or would like help with your estate plan.