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Estate Tax Planning Basics

by Joseph A. Lewis, JD, CPA

Why do tax planning? When a person dies, their assets, (notably real estate, cars, furniture, insurance, bank accounts, stock and bonds, and pensions) are part of the estate. Estate assets may be subject to an estate tax, depending on their value. The valuation is made as of the date of death. While the federal estate tax exclusion amount is $5,250,000, it is not only high net worth individuals who have to worry about estate tax planning. Before you ignore tax planning, consider the following:

Oregon has an estate tax exemption of $1m, which means if an individual’s worth is above that amount, an increasingly high percent of our population, the executor of the estate must file Form OR 706, due 9 months after the date of death.

Tax laws could change. Our legislators in Salem as well as Washington D.C. could reduce the estate tax exclusion leaving beneficiaries exposed to unexpected estate taxation.
More strategies are available now than ever before to maximize what your beneficiaries receive, and minimize what the IRS takes, including gifts ($14k, each or $28k for couples, per recipient), trusts, life insurance, and paying education or medical costs of another.
Also, we recommend young and old should have a living will, durable power of attorney, health care power of attorney, and in some cases a living trust, set up to establish how you and your property are to be cared for if disaster strikes, or else your lifetime of hard earned wealth could be squandered.

Poor planning or vague instructions could lead to disputes and court involvement. If the court is involved, probate costs and litigation will reduce your estate’s value. Probate is a court supervised legal procedure that determines the value of your will, gathers and distributes your assets, and provides a process for paying creditors and putting a time limit on claims against the estate. All of this costs money from your estate!

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