Protecting Your Estate from Oregon Death Taxes When You Move to Oregon from Another State
Have you recently moved to Oregon? Or maybe it’s been a while but you just didn’t think about updating your estate plan to protect your estate against Oregon’s death taxes. You may not know that Oregon death tax laws differ substantially from other states, and those tax laws may put your existing estate plan at risk of being heavily taxed on your death. If the unthinkable happens and you pass away without updating your trust or will, it could cost your loved ones a large portion of your estate in death taxes. That’s fine if you don’t mind paying part of your estate to the Oregon Department of Revenue, but I have yet to find anyone who is willing to knowingly do that. Even if you’ve done tax planning for your estate in the past, it’s important to meet with an attorney with expertise in Oregon estate and tax law to make sure that your estate will go to your loved ones without unnecessarily paying a portion the State of Oregon.
Oregon’s death tax laws often come as a surprise to people who have moved to Oregon from other states. California and Texas, for instance, have no state death tax whatsoever. Washington State taxes estates in excess of $2 million per individual at their death. Oregon is unique, in that death taxes are charged at your death on assets that exceed $1 million, at a rate starting at 10% and going up to 16%. If you are an Oregon resident, that tax is levied on all of your assets, even if those assets are held in another state (for instance, if you own real property in California, Oregon would levy death taxes on the value of your California property as well). And if you think $1 million sounds like a lot, start adding up all of your assets (real property, bank accounts, investments, retirement accounts, life insurance, vehicles, personal property). You may be surprised that the value of your estate is already at $1 million or beyond it.
Here is a typical scenario: mom and dad have an estate worth $2 million. Dad dies and everything passes to mom (whether in trust or through a will). When mom passes away with a $2 million estate, the State of Oregon will exempt the first $1 million of the estate from tax and collect death tax on 10%-10.5% of the rest of the estate – that’s over $100,000 going to the State of Oregon and not to mom and dad’s heirs. If mom and dad had an even larger estate, the State of Oregon would take a progressively larger sum, as illustrated by the following graph:
There are legal ways to avoid paying Oregon death taxes and there is nothing wrong with using legal methods to pay as little tax as possible. As of now, the Federal government is not taxing individual estates of less than $11.58 million, so most estate will avoid Federal estate taxes. The current Federal estate tax law is set to change in 2026 however.
Bottom line: Oregon death taxes apply to all of your assets that you own at your death if you are an Oregon resident, even those outside of Oregon. Do you own a home in California or Arizona? Those are part of your taxable estate as an Oregon resident and may cost your estate large sums of money without proper estate planning.
The Good News: With proper estate planning, you can eliminate, or at least minimize, the death tax the State of Oregon takes from your estate. There are many options to avoid paying Oregon death taxes, including bypass trusts, lifetime giving, charitable giving, and Irrevocable Life Insurance Trusts, but you should get on top of it now so that your estate, and your loved ones who you would like to inherit from you, don’t have an unwelcome bill from the Oregon Department of Revenue upon your death.
Tony De Alicante earned an LLM (Master of Laws in Taxation) from Georgetown University, providing him with a broader perspective than your typical estate planning attorney. Contact Tony today to schedule a consultation to revisit your estate and tax plans that were formed in another state.
De Alicante Law Group is an estate planning, probate and business law firm based in Bend, Oregon. Founded in early 2013 by Oregon native and veteran, Tony De Alicante, De Alicante Law Group is proud to serve people from across the state of Oregon. De Alicante Law Group is currently utilizing protective Covid-19 remote legal service methods (video conferencing, email, phone, postal service) as much as possible to protect its clients and staff, and actively travels to client’s homes for meetings as needed.
De Alicante Law Group is an estate planning, probate and business law firm based in Bend, Oregon, with an additional location in Tigard. Founded in early 2013 by Oregon native and veteran, Tony De Alicante, De Alicante Law Group is proud to serve people from across the state of Oregon. De Alicante Law Group is currently utilizing protective Covid-19 remote legal service methods (video conferencing, email, phone, postal service) as much as possible to protect its clients and staff, and actively travels to client’s homes for meetings as needed.