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analyzed in our previous blog entry, ³Future Changes to the Oregon Inheritance Tax Laws´ has been passed by both the Oregon House of Representatives and Senate with some tweaks. There is no indication that the governor will further change the bill or refuse to sign it. The first major change made by the Senate and approved by the House is that the amended Oregon Inheritance Tax laws only apply to estates of individuals who die after January 1, 2012. In our previous blog entry we noted that the House sought to increase the exemption level from $1.0 million to $1.5 million. However, the Senate refused to approve the increase. Consequently only estates under $1.0 million can escape Oregon Inheritance Tax liability. The complicated formula for determining the inheritance tax paid by each estate over $1.0 million has been replaced. The Oregon Inheritance Tax is now tied into current federal estate tax laws meaning that there is no longer a need to reference pre 2001 federal tax laws to determine the tax owed on an estate over $1.0 million dollars. The taxable estate is calculated based on federal and state tax laws in existence as of the date of death. To calculate the Oregon Inheritance Tax, take the amount of the taxable estate (gross estate less applicable deductions and exclusions) and, if it is greater than the amount in column one but less than the amount in column 2, the tax is the amount in column 3 plus the excess above the amount in column 1 multiplied by the percentage in column 4. 1 1,000,000 1,500,000 2,500,000 3,500,000 4,500,000 5,500,000 6,500,000 7,500,000 8,500,000 9,500,000 1,500,000 2,500,000 3,500,000 4,500,000 5,500,000 6,500,000 7,500,000 8,500,000 9,500,000 2 0 50,000 152,500 257,500 367,500 482,500 602,500 732,500 872,500 1,022,500 3 10.0% 10.25% 10.5% 11.0% 11.5% 12.0% 13.0% 14.0% 15.0% 16.0% 4
To illustrate how the Oregon Inheritance Tax will be calculated, assume an individual passes away and that individual¶s taxable estate is $2.25 million. Since the taxable estate is between $1.5 million and $2.5 million, the initial amount of tax owed will be $50,000.00 (see column 3). The difference between $1.5 million and $2.25 million is $750,000.00; consequently an additional $78,750.00 ($750,000.00 x 10.5%) is added to the total tax due. The total Oregon Inheritance Tax is $128,750.00 on a $2.25 million estate. Another tweak made to the house bill that was approved by both the House and Senate is that estates of non-Oregon residents that only owned intangible personal property with its situs in Oregon are not subject to the Oregon Inheritance Tax. Intangible personal property includes a bank account, brokerage account, stocks or bonds, property owned by a revocable living trust or by an irrevocable trust with a trustee in Oregon. Estates of nonresidents that own real property and personal property in Oregon are subject to the Oregon Inheritance Tax. This tweak is significant for individuals that may move to another state but continue to maintain their financial accounts in Oregon because of the difficulties and inconveniences associated with changing banks or financial advisors. These and other changes to the Oregon Inheritance Tax are significant and may change your current estate planning needs. You should contact an attorney for a consult on how these changes may affect your current estate plans and to explore various options to take advantage of these changes to Oregon¶s Inheritance Tax. ©06/24/2011 Kevin J. Tillson of Hunt & Associates, P.C. All rights reserved.