Gift Taxes versus Estate Taxes in Estate Planning

Estate planning and gift tax in Oregon, like in other parts of the United States, are closely related because both involve the transfer of assets to heirs or beneficiaries. As an experienced estate planning lawyer in Portland, I work with clients who have large estates that may be subject to both estate and gift taxes. Here are key considerations regarding estate planning and gift tax in Oregon:

Oregon Estate Tax: Oregon has its own estate tax that is separate from the federal estate tax. The Oregon estate tax applies to estates with a total taxable value exceeding a specific threshold, which is currently $1 million. This means that estates valued at or below $1 million are exempt from Oregon estate tax. The estate includes all assets owned by the decedent, less any liabilities that must be paid. 

Oregon Gift Tax: Oregon does not have a separate state gift tax. However, gifts made during your lifetime may have implications for your Oregon estate tax liability because the state may include lifetime taxable gifts when calculating the taxable estate.

Federal Estate and Gift Tax:

• While Oregon has its own estate tax system, it is important to note that the federal estate tax and gift tax laws also apply. 
• The federal estate tax applies to estates with a total taxable value exceeding a specific federal threshold, which is currently $12.92m. This value refers to the value of the estate after paying all debts owed. 
• The federal gift tax is related to lifetime gifts and is part of the federal estate and gift tax system. Gift taxes are generally paid by the giver. You can make annual gifts up to a certain limit (the annual exclusion) without triggering the federal gift tax. This annual exclusion is $17,000. 
• The lifetime gift tax exemption is also $12.92m. This comes into play when a gift is made in excess of $17,000 in a given year. If such a gift is made, the amount above the annual exemption would be applied toward the lifetime gift tax exemption.
  • As an example, let’s suppose that a parent makes a $1m gift in a given year to their child. Although this gift exceeds the $17,000 threshold, it will not be subject to tax. Rather, the parent’s lifetime exclusion would be reduced by $1,000,000-$17,000 = $983,000. As such, the parent’s remaining lifetime gift tax exclusion would be $12,920,000 – $983,000 = $11,937,000.

Estate Planning and Gift Tax Implications: Estate planning in Oregon involves creating a comprehensive plan for the management and distribution of your assets, which may include strategies to minimize estate and gift tax liability. Some considerations related to estate planning and gift tax in Oregon include:

1. Gifting Strategies: You can use the federal annual gift tax exclusion to make tax-free gifts to your heirs during your lifetime. Gifting strategies can help reduce the size of your taxable estate.
2. Lifetime Exemption: The federal estate tax exemption is high but subject to change. Estate planning may involve using the lifetime exemption to shelter assets from federal estate tax.
3. Oregon Estate Tax Planning: If your estate is close to or above the Oregon estate tax threshold, consider strategies to minimize or eliminate Oregon estate tax liability.
4. Trusts: Certain types of trusts, such as irrevocable life insurance trusts (ILITs) or grantor-retained annuity trusts (GRATs), can be part of an estate plan to reduce potential estate and gift tax burdens.

Conclusion

It’s important to note that tax laws can change, so it’s advisable to stay updated on the latest federal and state tax regulations and consult with professionals who specialize in estate planning and tax matters to create an effective and tax-efficient estate plan tailored to your specific situation. If you have any questions about gift taxes and estate planning, contact Thapar Law at 503-295-9741 or send us a message.