The basic rules concerning federal estate and gift taxes seem to always be changing. For 2019, federal estate tax law exempts the first $11.4 million from estate taxes for each individual. This equates to $22.8 million for married couples who plan correctly. Amounts above the exemption are subject to a 40% federal estate tax. This exemption amount is indexed for inflation over the next few years and is much higher than it has ever been under prior law. The adjusted amount drops by half when current law sunsets at the end of 2025, however.

For gifts, federal law currently allows an individual to make gifts of up to $15,000 per year per recipient during the donor's lifetime. Gifts in excess of this limit are generally subject to reporting for federal gift tax purposes and, in cases where the cumulative reportable lifetime gifts exceed $11.4 million, gift tax would need to be paid. The gift tax is a separate federal tax to be paid by the donor for gifts of over the $15,000 exclusion amount. Thus, if a larger gift is made and would otherwise be taxable, you may elect to use part of your lifetime exemption from federal estate tax ($11.4 million per person under current law). There is no state gift tax, only a federal gift tax, and the tax rate is 40%.

Oregon and Washington still have their own estate tax rules. The exemption amount for Oregon estate tax is $1.0 million per person. In Washington, the current exemption amount is $2.193 million per person. The rates for Oregon estate tax range between 10% and 16%, and this tax applies to all amounts over the $1.0 million exemption. Similarly, the rates for Washington estate tax range between 10% and 20%, and this tax applies to all amounts over the $2.193 million exemption. With proper planning, these exemptions are doubled for married couples.

Many people are surprised to learn their estate is over the exempt amount and their heirs will be required to pay estate tax at the state and possibly the federal level. For these purposes, your estate generally consists of all of your assets, including home, vacation property, investments, business interests, life insurance proceeds, retirement funds, inheritances, vehicles, jewelry, artwork, and all other real and personal property. All estate taxes must be paid within nine months after the date of death.

If you are concerned about your estate incurring estate taxes, or you need advice about estate and gift taxes, contact us at 503.228.6044 or at any of the e-mail addresses below for a consultation. We are available to help develop strategies to reduce or eliminate estate taxes as appropriate for your circumstances.