It is only a slight exaggeration to say that federal estate taxes are not a worry for most people unless they have (or control, or have given away) well over eleven million dollars ($11,200,000 to be precise).
Oregon state estate taxes start at one million dollars ($1,000,000), however.
There are a large number of people who do not really realize that they, as a couple, control well over a million dollars when life insurance, real estate, and IRAs or 401Ks are taken into account.
A house bought in 1970 for $70,000 can be worth well over half a million dollars now, especially if there have been upgrades, the addition of a shop, or the like.
In some cases, that house bought for $70,000 in 1970 may even be worth a million dollars or more even without taking into account other assets that a couple may have.
The same is true of business property, of course.
In addition, there can be quite a lot of value in IRAs, 401Ks, and other pre-tax investments, and for some people there can be quite a bit more in other investments.
It is not uncommon for lawyers and financial advisors and CPAs to have clients who have taxable estates that total well over a million dollars, even if the clients do not consider themselves to be wealthy.
Hopefully, the people with lawyers are getting good advice, and following that advice, and are avoiding estate taxes that could easily be avoided. All too often, however, I hear of people who had financial advisors, or CPAs, who suggested that the clients take basic steps to protect themselves from Oregon state estate taxes, but who failed to do this until it was to late.
While both spouses are alive and well, making such plans can be relatively simple. Once one spouse has become incompetent, it can often be quite difficult to implement such a plan, and after the first spouse has died most of the good options for avoiding such taxes are completely gone.
A new estate plan which takes this situation into account can cost a few thousand dollars, but can save the approximately ten percent Oregon state estate tax that will be due on amounts over one million dollars ($1,000,000) when the second spouse dies. That tax would be about fifty thousand dollars ($50,000) on an estate of one and a half million dollars ($1,500,000), and would be about a hundred thousand dollars ($100,000) on a two million dollar ($2,000,000) estate.
Please also see the companion article posted on this website dealing with the obverse situation, where the owners of assets have estate plans that were developed in the days when federal estate taxes started with estates of $600,000, and the traps that people frequently find themselves in when they have estate plans that were designed with this $600,000 estate tax (or death tax) threshold in mind.
Steven A. Heinrich
Divorce & Custody
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