Facts About Estate Tax

How Estate Taxes Can Effect You

Most people are aware that an estate tax exists, but few actually know how the estate tax works and whether it will apply to their estate. As most people seldom encounter estate taxes other than those that have previously served as a personal representative of an estate or trustee of a trust, the this article can help answer any basic questions you may have about your estate and whether it may be subject to estate taxes. For specific advice on whether your estate may be subject to Federal or State estate taxes, consult with an attorney.


Estate taxes are different than most taxes people are familiar with, such as income tax or sales tax. Generally, estate taxes are levied on the total assets of an individual, valued as of their date of death. If any estate tax is owed, it is paid by the deceased individual’s estate or trust; beneficiaries do not pay the estate tax.


Estate TaxLike the concept of income tax, you potentially have to pay both federal and state estate taxes. Many states do not have an estate tax, but here in Oregon we do have an estate tax. The Oregon estate tax applies to all assets transferred over $1 million. The taxable rates for assets over $1 million are between 10% and 16%. Thus, if an individual dies leaving an estate of $1,400,000 to his three children, the amount over $1 million ($400,000) will be subject to the Oregon estate tax of 10%, resulting in $40,000 in Oregon estate tax liability.


In 2014, every person may leave or give away up to $5.34 million without owing any estate tax. As a practical matter, that means that under the new rules about 99.5% of all estates will NOT owe any federal gift/estate tax. The exemption amount is indexed for inflation each year. Unlike legislation enacted in the last several years, there is no sunset provision for these amounts; indexed for inflation, they will stay in force until Congress changes them again.


Individuals and couples should work with an attorney who has experience in helping craft an estate plan to reduce or eliminate any potential estate tax liability. By setting up an estate plan that addresses any potential estate tax issues, your estate could potentially save tens of thousands of dollars in unnecessary estate taxes.


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