Uncertainty in Estate Tax Laws

Federal Estate taxes are scheduled to be totally phased-out in 2010. The so called “death tax” has been the subject of much debate, and there is a lot of uncertainty surrounding its future. Although phasing out the estate tax is popular with voters many commentators think that it is not economically feasible. Adding to the uncertainty surrounding the federal estate tax is a “sunset provision” in the law that will reinstate the estate tax in 2011. It is unclear at this time whether the sunset provision will be triggered or if Congress will take action to make the change permanent.


This new law makes it absolutely essential for people to locate their estate plans and ensure that they are up to date. The recent changes to federal and state laws make it more important than ever to have an estate plan that fully utilizes tax planning tools. At SGR&K we recommend you meet with your estate planner in order to determine if your estate-plan takes full advantage of the federal and state credits presently available and to ensure your estate is protected. This is particularly vital as the federal unified credit currently allows estates to shelter up to $1,500,000, while the state of Oregon allows taxpayers to shelter only $850,000.


Since Oregon estate taxes are no longer effectively connected with the federal unified credit amount some taxpayers will be able to avoid paying federal taxes, but will still be accountable for state taxes. This forces taxpay- ers and tax planners to decide between using the full federal credit while paying state taxes, or sheltering a smaller portion of their estate in order to avoid paying state taxes. This decision will most commonly have to be made by married couples with substantial estates and single individuals setting up charitable and other trusts.


One of the best ways to decrease future estate taxes is to begin the practice of annual gifting. It is possible for a taxpayer to make annual gifts of up to $11,000 without triggering any tax consequences.
This enables parents and grandparents to move money out of their estate and into the estate of the next generation without either party paying taxes on the transfer. Amounts transferred that exceed $11,000 are only taxed on the amount of the gift that exceeds the exemption.


Regardless of the size of an individual’s estate it should be a priority to plan for the future and to keep abreast of changes in the law. This will help prevent unplanned tax consequences upon death. If you have any questions call your estate planner, or utilize the SGR&K estate planning department to determine how the changing laws affect your estate.