Legal Analysis: Highlights from October 2023

Mb October 2022 Newsletter | Incapacity Planning Attorney | Myatt & Bell

Oregon Estate Tax Update: $15 Million Estate Tax Exemption for Natural Resource Property

By Attorney Bryce Kaufman

This month’s newsletter highlights an important change in Oregon’s estate tax law.

Senate Bill 498, signed into law earlier this year, went into effect on September 24, 2023, and introduces a new Oregon estate tax exemption for natural resource property, offering a valuable opportunity for Oregon residents. In short, Senate Bill 498 is meant to ease succession issues for family farm, forest, and fishing estates with a tax exemption worth up to $15 million.

Qualifying for the Exemption

Ownership of natural resource property does not automatically grant the estate tax exemption. To qualify for this exemption and reduce your estate tax burden, several conditions must be met:

Ownership Duration: The property must have been owned by the decedent for at least five years before their death.
Material Participation: During five years before the decedent’s death, either the decedent or a family member must have materially participated in the land for farming, forestry, or fishing purposes for at least 75% of the time.
Family Transfer: The property must be transferred due to the decedent’s death to a family member, who then must hold the property for five consecutive years after the decedent’s death.
Post-Death Participation: During five years after the decedent’s death, any family member must materially participate in the land for farming, forestry, or fishing business purposes for at least 75% of the time.

It is important to note that if the property is sold within five years of the decedent’s death, or if the material participation requirement isn’t met, there’s a provision for an additional tax. This additional tax is calculated as if the property had been part of the taxable estate.

Defining Key Terms

To ensure that you meet these requirements, it’s essential to understand key definitions:

Family Member: This broadly includes individuals within the third degree of relation, whether by blood, marriage, adoption, civil union, or domestic partnership, to another person.
Natural Resource Property: This encompasses property in Oregon used in the operation of a farm business, forestry business, or fishing business owned by the decedent at the time of their death. The full definition can be found in ORS 118.140 and includes a wide range of property types.
Materially Participate: This term is loosely defined and likely to evolve through future litigation and regulation. It currently means to engage in active management, as defined in section 2032A of the Internal Revenue Code, but it lacks a precise definition. While the Department of Revenue may adopt rules to clarify this definition, until then, or if ever, it is important that you and your family continue to work with your attorney to help ensure this requirement is met.

Choosing Between the Credit and the Exemption

SB 498 does not take away the existing credit against the Oregon estate tax for certain natural resource property under ORS 118.140.

Currently, farm families can use the credit to reduce their estate tax burden by up to $7.5 million, however, several conditions must be met to qualify. In part, Senate Bill 498 was designed to alleviate many of the hurdles to apply for the credit and expand who qualifies. Nevertheless, an estate can still either use the credit or the new exemption, but not both.

We’re Here to Help!

This new exemption presents an opportunity for qualifying Oregon residents to optimize their estate planning strategies and potentially reduce their estate tax liability in a significant way.

Be sure to consult with a qualified estate planning attorney at Myatt & Bell to explore how this new law can benefit your estate.

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Estate Planning & Peace of Mind

Have you found yourself making excuses for why not to get your estate in order? Maybe you’re convinced that you really don’t need estate planning. If you have assets and loved ones, you need an estate plan. Having an estate plan that is right for you ensures your loved ones are taken care of and that the transition is as easy as possible.

Attend one of our complimentary estate planning webinars and see for yourself. Having your estate plan prepared and understanding the why’s behind the importance of estate planning can bring you the peace of mind you have been needing. Join us at our next Estate Planning Informational Webinar by clicking here.

From Our Clients

“All of the staff were amazing and thorough. Information was presented in a manner that was understandable and clear.” – Stephen K.

“We selected Myatt & Bell to update our estate plan and associated documents. Consultations with Attorney Lindsey George were focused and professional. Asset worksheets were clearly explained and easy to work with. All documentation was exchanged electronically using the online Clio secure document system. Myatt & Bell provided a complete service resulting in an impressive package of legal documents correctly reflecting our desired outcomes. We will continue to return to them as updates are needed.” – Charles I.

Families choose Myatt & Bell to design their estate plans with honest optimism and meticulous attention to detail.

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