Do I Need a Will? Moderate Wealth and/or Non-Taxable Estates

Tuesday, November 17, 2020

    Some people wonder if they need a Will or other estate plan if they are ordinary middle class folks, or even people of moderate wealth, but who fall below the estate tax threshold.

    It is important to remember that if you (or you and your spouse together) have more than a million dollars, you will likely have to pay Oregon State estate tax, when you pass on (or when the second of you passes on), even though you will not have to pay any federal estate tax.

    With proper planning, a couple can pass two million dollars without paying any state estate tax.  Without planning such a couple will likely pay Oregon State estate taxes on all amounts over a million dollars when the second spouse dies.

    Given the ever increasing value of homes, many people who think of themselves as middle class, but who have a home and IRAs or 401Ks instead of PERS or some other true pension find themselves with taxable estates, much to their surprise.

    With proper planning and a little bit of advance notice of an impending death (even just a few days notice should be enough in most cases), even a single person can likely avoid Oregon State estate tax, despite being over the Oregon State estate tax threshold, if there is proper advance planning for their estate.

    These plans will almost always be more complex than a mere Will, but in most cases, these plans do not need to be the hugely complex plans that one sees on TV.

    Even if your probate estate falls below the Oregon State estate tax threshold of a million dollars, if you have assets that pass outside of probate, or if you have life insurance that brings the amount up above a million dollars (even though some of these assets do not flow through the probate estate, and even though you don’t have assets totaling a million dollars during your lifetime), you can still have an estate that is large enough to result in Oregon State estate tax - but with proper planning, you may still be able to avoid such taxes in at least some cases.