It's that time of year and you can smell taxes in the air. I am seeing and hearing all sorts of news right now about how everyone is getting smaller tax refunds. This isn't necessarily a bad thing. While taxes are on everyone's mind, I'd like to explore how taxes affect estate plans.
Is your tax refund smaller this year? Don't use that as a measure of good or bad.
You need to need to look at your actual tax liability...how much did you actually pay in taxes. If you paid less this year, congratulations. I can hear everyone right now, "but my refund is smaller."
That is great - your refund is a return of a no-interest loan that you made to the government. Loaning out money for free is no fun. Plus, that means you had more money in your pocket with every paycheck in 2018.
The good news is that 99% of everyone reading this will never have to pay the Federal Estate Tax as it is currently structured. The current Federal Estate Tax Exemption is $11.4 million. That means not one dollar is taxed until your estate is over $11.4 million.
Further, if you are married, when you die your unused exemption can be ported over to your spouse. This allows them to use their exemption and your leftover exemption when they die.
Oregon is a totally different animal. The Oregon Estate Tax Exemption amount is only $1 million. That means anything in your estate over $1 million (that you don't leave to your spouse) will incur Oregon Estate Tax.
Further, the Oregon Estate Tax Exemption is not portable. Rather, it is a use it or lose it exemption.
Buy creating an Estate Plan that takes the Estate Tax into account, you can substantially reduce your Estate Tax burden. You may not be able to reduce it to zero, but you can make sure that you don't pay more than your fair share.
If you'd like to learn more about Taxes & Estate Planning or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
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