Some states collect an Estate tax (also known as a “death tax”) which is based on the value of the deceased person’s estate and, in some states, who inherits it. As of January 1, 2015, 19 states and the District of Columbia collect an estate tax, including Oregon and Washington.
Each of these states has its own laws governing the amount of assets that are exempt from estate tax, what deductions can be taken, and the applicable estate tax rate. For an estate to be potentially subject to a state’s estate tax, the deceased must have either lived in the state at the time of death or owned real property (real estate) or tangible personal property located in the state.
Estate Tax Examples
These examples will help illustrate when an estate may be potentially subject to the state estate tax:
1. Deceased Person was an Oregon resident. You inherit your uncle’s estate and he lived in Oregon at the time of his death. Will the estate potentially be subject to Oregon’s estate tax? The answer is yes, because your uncle lived in Oregon at the time of his death and Oregon has an estate tax. However, whether or not the estate will actually owe any estate tax will depend on the value of your uncle’s estate and what deductions can be taken.
2. Deceased Person was a Florida resident. You inherit your uncle’s estate and he lived in Florida at the time of his death. Will the estate potentially be subject to a Florida estate tax? No, because Florida does not collect an estate tax. Or, if your uncle was legally domiciled in Florida, and was staying in Oregon—but didn’t own property there—his estate would not be subject to Oregon estate taxes.
3. Inheritor is an Oregon Resident. You inherit your uncle’s estate. He lived in Florida and owned property there at the time of his death, and you live in Oregon. Will your uncle’s estate be subject to the Oregon estate tax? The answer is no, because your uncle was a Florida resident and owned no property in Oregon (and Florida has no estate tax). But what if your uncle was domiciled in Florida at the time of his death, and owned a second home in Oregon? In that case, your uncle’s estate would potentially be subject to Oregon estate taxes because he owned a house (real property) there, and Oregon has an estate tax.
Oregon and Washington Estate Taxes
As you can see, state estate taxes can be tricky and may apply in unexpected ways. Oregon estates are exempt from taxes up to $1 million. Oregon estates over $1 million are taxed at rates that range from 10 percent to 16 percent, depending on the size of the estate. Washington state exempts estates up to $2 million. Over $2 million, tax rates range from 10 percent to 20 percent, depending on the size of the estate.
Please contact us if you have questions or concerns about Oregon or Washington estate taxes, or to schedule a complimentary estate planning consultation.