ESTATE TAX PLANNING
ARE YOU WORKING FOR YOU, YOUR FAMILY OR THE IRS?
When You Die You Will Pay Taxes Again On Income and Assets That You Paid Taxes on at Least Once When You Earned It, Consumed It, or Held It.
Almost every adult has heard the phrase, “the only sure things in life are death and taxes.” Think about it, what taxes have you paid during your life time:
- Federal income taxes from wages
- Federal self-employment taxes if you own a business;
- FICA insurance taxes;
- Oregon income tax;
- If you live outside of Oregon, sale tax on purchases;
- Medicare taxes;
- Gasoline taxes;
- Taxes on you tablet data plan;
- Medical equipment taxes;
- Medicare taxes;
- Automobile license fee tax;
- Real estate transfer taxes;
- Capital gains taxes;
- Dog license fee tax;
- Utility taxes;
- Telephone taxes;
- Property taxes on you home;
- Personal property tax;
- Tax on the cost of tanning at a salon;
- If you live in Portland, an art fee tax; and
- An environmental tax.
This list just names a few of the taxes you pay while you are alive. When you die the government has another list of taxes it is standing by to tax you from the grave. Those taxes include:
- Estate taxes;
- Oregon State inheritance tax;
- Capital gains tax;
- Gift tax;
- Generation skipping tax;
- Federal income tax on IRD income; and
- State income tax.
I am sure there are a few more taxes assessed at death depending on the state or county you live in. Make no mistake, if you want to leave more to your spouse and children than to the government, then tax planning has to be an important part of your estate planning. You might not be subject to some of the death taxes if you died today. However, if you live another twenty years the size of your estate could grow so that you will be subject to all of the taxes. Further, the exemption amount, the value of your gross estate before the estate and inheritance is triggered, has changed many times over the last 15 years and will likely change with each new administration. What is a non-taxable estate today, may be a taxable estate with the start of a new year.
The Estate Tax, Two Against One If You Live in Oregon
Oregon Decoupling – Or How to Make it More Complicated
Estate planning for Oregon is more complex than if you live in say, Texas or Delaware, state that are not “decoupled.” In simple terms, decoupled simply means that some states, such as Oregon and Washington, have broken from the federal estate tax and established their own inheritance tax. People who live in certain states pay no state inheritance tax. In Oregon, if the value of the estate exceeds the current exemption amount when you die, your family will pay both federal estate and Oregon inheritance tax.
The IRS has made tax planning even more complicated by compressing taxes for Trust income not distributed. This means that the same amount of income in a Trust is taxed sooner at a higher rate, than if the same income was taxed to an individual. Now, in tax planning an estate planning attorney must consider the compressed Trust income tax, the capital gains surcharge tax, the federal estate tax , the Oregon inheritance tax, the generation skipping tax, and the gift tax laws. Oregon then has some tax credits that only apply in Oregon such as the qualified property credit, the marital deduction, and the Oregon natural resource credit. You can see why tax planning if you are an Oregon resident is not something you should try at home.
Death Tax Planning In Oregon
In 2016, the federal estate tax and federal gift tax exemption is $5.45 million per person and the Oregon inheritance tax exemption is $1.0 million per person. In 2016 a married couple can pass up to $10,900,000 on to their family free of the federal estate taxes and $2,000,000 free of Oregon inheritance tax. The federal tax rate is 40% and the Oregon tax rate is 10%-16%.
Annual Federal Gift Tax Exclusion Could Save You 40% in Gift Tax
In addition, in 2016, you can give any one person up to $14,000 each calendar year and there will be no 40% federal gift tax. Who pays the gift tax? The person making the gift. The federal gift tax is based on the fair market value of the assets transferred. The federal tax exemption is person, so If you have three children or three nieces or nephews you could give $14,000 to each person without paying a gift tax.
What Is Portability And Why Do You Want It?
Starting in 2012, under federal law a deceased spouse estate may make a portability election. The effect of portability is that any unused federal exemption from the estate tax may be transferred to the surviving spouse and used at the time of his or her death. The federal exemption in 2016 is $5.45 million. Portability is an option to consider when a married couple’s combined estate value is less than two times the federal exemption or $10.86 million. If your estate has annuities, retirement plans, and a personal residence you might consider portability.
Be sure to ask your estate planning attorney about the different options of planning with portability and without portability. It is not for everyone, but it might apply to you. If it does apply to you, you may need to update your Will or Trust.
A Salem Oregon Estate Tax Attorney that Comes to You
Whether it is your house, work, retirement home, or the local meeting place, I will come to you so you can discuss your estate tax planning in a causal relaxed environment. Most people get nervous in the fancy attorney office and dealing with incapacity, death and tax planning can add to the stress.
Oregonians are busy people. They work long hours, travel a distance to work, are involved with their children’s activities, local organizations, and some are full time homemakers and child care providers. To accommodate your busy schedule, I accept evening and week-end appointments.
My clients come first. I want to make it as easy and convenient for them to take care of their estate planning needs as possible. Going to my clients and scheduling around their schedules makes it a better experience for all involved.
Pick Up the Phone and Call Now
If you do not have a comprehensive estate plan that includes planning for the many taxes that your estate might be subject to, or if you have one and it needs to be evaluated for the impact of changes in the tax law since it was written, then you need to call me, Russ Pike, at 503.888.0952 now to set up a free evaluation with an experienced Salem Oregon Estate Tax Planning attorney to see how your estate plan may be effected under current tax law and learn if tax planning is needed. At your free consultation, I will explain not only the tax laws, but how estate planning works. You will not feel rushed and I will answer all your questions.