When you picture your legacy, your vision may include a smooth disbursement of your assets among your intended beneficiaries. The last thing many people want is for their loved ones to dispute estate issues after their passing, which is why putting estate planning documents in place is a wise decision.
The purpose of creating an estate plan is to document your wishes and preferences about how you would like your estate to be administered in the event of your incapacitation or passing. By putting these crucial legal documents in place, you can minimize costly and stressful legal battles that often arise due to the ambiguity and uncertainty of not having clear plans or guidelines for how to handle your estate. As you work with your trusted estate planning attorney, you can explore the tools that will best support your goals and protect the financial security of your loved ones, no matter what the future may hold. Additionally, you can discuss how federal and estate taxes could affect your approach to the estate planning process, allowing you to make more informed decisions with greater certainty and confidence. With that in mind, let’s take a look at some of the key differences between federal and state taxes when it comes to estate planning and how you can use this information to guide your approach to legacy and estate planning moving forward.
Federal Estate Tax Overview
Simply put, the federal estate tax exception refers to the amount of assets that can be transferred to beneficiaries without being subject to federal estate tax obligations. According to the Internal Revenue Service (IRS), estates that are worth less than $13.99 million at the time of the individual’s passing will be exempt from paying any federal estate taxes. For estates whose value exceeds this threshold, federal estate taxes will apply, which can be as high as 40 percent. This relatively high threshold means that most Washington and Oregon residents probably won’t be subject to federal estate taxes. However, if your estate is worth more than $14 million, it is worth discussing the potential tax implications with a seasoned estate tax lawyer for more detailed legal guidance.
State Estate Taxes and How They Differ From Federal Estate Taxes
Federal estate taxes generally apply to larger estates with significant assets. However, states like Oregon and Washington also have their own estate taxes with lower exemption limits and additional tax rates. As you approach the estate planning process in the Portland or Vancouver area, it’s important to understand some of these differences so that you can create an estate plan that minimizes your tax burdens and safeguards your legacy as much as possible.
Understanding Oregon Estate Tax Rates
The lowest estate tax exemption rate in the country, Oregon established its rates in 2001 and did not include any accommodations for inflation. According to the Oregon Legislature, “Estate tax is imposed when the property transfer is caused by death and is levied on the value of property left by the deceased. Inheritance tax is also imposed after death, but levied on the amounts that each relative receives depending on their income and relationships to the deceased.” In other words, it’s important to take estate tax factors into consideration when establishing an estate plan that aims to preserve your assets as much as possible and ensure a smooth distribution of property upon your passing. Currently, Oregon’s estate tax exemption is a mere $1 million, which means that any estates at or exceeding this threshold are likely subject to state estate taxes.
Washington Estate Tax Considerations
Those who reside in Washington state will also need to be aware of the state’s estate tax exemptions. Washington is similar to Oregon in that it has a relatively low exemption threshold (currently set at $2.193 million), which creates significant tax liabilities for larger estates. Additionally, the estate tax rates in Washington state are among the highest in the nation, so it’s important to anticipate how these rates and thresholds will affect your estate when the time comes. As you begin to work on your estate plan, it’s worth discussing state estate tax considerations with your Vancouver estate planning lawyer to ensure that the strategies you implement are suited to address your specific needs and goals.
How Federal Estate Taxes Differ From State Estate Taxes
Federal estate taxes differ from state estate taxes in a few ways. While the federal exemption is portable between spouses (which means that one spouse’s unused exemption can be transferred to the surviving spouse, states do not authorize this transfer. Another key difference is that the federal estate tax applies to every asset you own. In contrast, states like Washington and Oregon provide exclusion ratio assets (i.e., real estate or business interests that are owned out of state). These nuances can be complex to grasp, so it’s worth discussing the specific details and implications of these considerations with your knowledgeable estate planning attorney.
Why Taking a Proactive Approach to Estate Planning is Essential
At first glance, the estate planning process can seem daunting and even intimidating. However, those who move through this process with the guidance of a trusted and experienced estate planning lawyer often find the experience to be reassuring and even empowering. Once the protections are in place, you can rest easier knowing that your loved ones and your legacy will be sufficiently protected as the future unfolds. Even if you are relatively young or you are just starting to grow your family, it’s never too early to start planning for a secure and bright future. Should the unexpected happen, the estate planning protections you have put into place will provide much-needed protection and guidance to ensure that your vision and wishes are known and respected. If you are ready to learn more about how you can begin to safeguard your future and keep your loved ones secure, consider reaching out to a trusted and experienced estate planning attorney to get started.
At Myatt & Bell, P.C., we believe that every client deserves customized estate planning services to ensure that their loved ones and legacies enjoy the strongest protections. If you have questions about the estate planning process, we invite you to contact our Vancouver, Washington office at (360) 360-0212 or our Portland, Oregon office at (503) 641-6262 to get started with a dedicated and caring estate planning attorney.
The content on this blog is for general informational purposes only and does not constitute legal advice. The author of this blog is not an attorney, and the views expressed are solely those of the author. Always seek the advice of a qualified attorney for legal guidance regarding your unique situation.
