Oregon charges its own estate tax in addition to the federal estate tax, but it doesn’t charge an inheritance tax. What follows is a guide to the state’s inheritance laws, including what happens if there is no valid will; how Oregon state law treats different family situations; and special inheritance laws specific to Oregon. Estate planning is a complicated topic, though, and it’s a good idea to work with a financial professional to guide you through the process. If you don’t already work with one, consider finding a financial advisor in your area.
Does Oregon Have an Inheritance Tax or Estate Tax?
The vast majority of families do not have to take the federal estate tax into account when estate planning, since an estate must be worth more than $11.18 million to be taxed by the federal government. However, some states levy both an inheritance tax and an estate tax. Estate taxes are collected based on the value of the estate, where inheritance taxes are collected based on the amount that an individual inherits and who is inheriting them. The federal government does not levy an inheritance tax.
Oregon has no inheritance tax. When state residents and individuals who own property in the state begin their estate planning process, they may need to take Oregon’s estate tax into consideration. For deaths that occurred on or after Jan. 1, 2012, estates with a gross value of $1 million or more must file an Oregon estate tax return, Form OR706. However, it is still possible that no estate tax will be charged for some estates with a gross value of more than $1 million, as a result of applicable deductions and exemptions.
Oregon has a graduated estate tax. It starts at 10% and goes up to 16%. The amount the estate is taxed depends on how much the estate is worth after the $1 million exemption and any other exemptions are taken.
Other Necessary Tax Filings
When you die, there are many federal and estate tax situations that need to become a priority for those who survive you. Besides the state estate tax, you need to look out for the following:
- Final individual federal and state income tax returns – federal tax returns are due by tax day of the year following the individual’s death. State tax returns and payment are due nine months after the death of the estate owner. Oregon allows for a six-month extension to file your tax return, but it doesn’t extend your time to pay. The state only grants extensions to pay under special circumstances as identified by OAR 150-118-0150.
- Federal estate/trust income tax return – due by April 15 of the year after the individual’s death
- Federal estate tax return – due nine months after the individual’s death, although an automatic six-month extension is available if asked for before the end of the nine-month period
- This is only required of individual estates that have gross asset and prior taxable gift value of more than $11.4 million
The Internal Revenue Service requires each estate to have its own employer identification number (EIN) to represent itself in any tax-related matters. To apply for an EIN, visit the IRS website or apply by fax or mail.
Dying With a Will in Oregon
Basic requirements for a valid will in Oregon include the decedent signing or acknowledging their will in front of two witnesses and the two witnesses signing the will within a “reasonable time” before death occurred. In Oregon, you do not need to notarize your will to make it legal. However, if you do, this will speed up the probate process.
If the will is determined to be valid, the next step is the probate process. An individual, often an adult child or a surviving spouse, is nominated by the decedent’s will to be the executor. Once appointed, the executor has the legal authority to gather and value the assets owned by the estate, pay taxes and bills and, finally, distribute the property to the heirs. Other assets, also known as “non-probate” property, can generally be transferred to the other owner without probate.
Oregon offers a simplified probate process for small estates. Small estates in Oregon are defined as those where the fair market value of the estate is $275,000 or less, and not more than $75,000 of the estate is personal property and not more than $200,000 is real estate. To use it, inheritors file a written request with the local probate court requesting to use the simplified probate process. The court can allow the executor to distribute the assets without needing to go through a lengthier probate period.
Dying without a Will in Oregon
Dying without a will isn’t ideal if you care about estate planning, or deciding where your assets will end up after your death. Oregon inheritance laws label these types of estates “intestate,” which means there is no valid will. The court then follows intestate succession laws to determine who inherits your property and how much of it they get. Since there is no will to nominate an executor, the court appoints someone, usually a surviving spouse or an adult child, to be the executor of the decedent’s will. The executor takes care of the distribution of the decedent’s will.
Often there are extenuating factors, but if you can help it, it’s best not to die intestate and put your loved ones through that kind of stress. If you’re not sure what kind of estate plan you want to make you can get the help of a financial advisor.
Spouses in Oregon Inheritance Law
Under Oregon inheritance law, if you pass away intestate with a spouse, what your spouse inherits depends on whether or not you have living descendants – children, grandchildren or great-grandchildren. If you don’t have any descendants or if all your children are also your spouse’s children, then your spouse inherits all of your intestate property.
However, if you die without with at least one child, grandchild, or great-grandchild who is not your surviving spouse’s descendant, then your spouse can only inherit half of your intestate property.
Children in Oregon Inheritance Law
If you die intestate in Oregon, your children will get an “intestate share” of the property. The size of the share depends on how many children you have, whether their parent is your surviving spouse and whether you have any children from a prior relationship.
|Intestate Succession: Spouses and Children|
|Inheritance Situation||Who Inherits Your Property|
|Children but no spouse||– Children inherit everything|
|Spouse but no children||– Spouse inherits everything|
|Spouse and children from you and that spouse; and the spouse has no other children||– Spouse inherits everything|
|Spouse and at least one child from you and someone other than that spouse||– Spouse inherits half of your intestate property; descendants inherit the other half|
In order for your child to inherit from you under Oregon’s intestate laws, the state must consider them to be legally your child. There are some factors you might want to consider.
Legally adopted children will receive an intestate share, just as your biological children do. In addition, children born outside of marriage will also receive an intestate share as long as you acknowledged your paternity in writing or your paternity was otherwise established under Oregon law. Grandchildren will receive a share only if their parent is not alive to inherit.
Foster children and stepchildren you never legally adopted will not receive a share under intestate law, neither will children you placed for adoption who were legally adopted by another family. However, your spouse adopting your biological children will not affect their intestate inheritance.
The decedent’s children can still receive their share if they are born after the decedent’s death, as long as the child survives at least 120 hours after birth. A child conceived from your genetic material after your death will only receive a share if the child is conceived within two years after your death, the person who has control of your genetic material gives written notice to your personal representative within four months of their appointment, your will or trust provided for the child and you signed a document giving permission to use your genetic material.
Unmarried Individuals Without Children in Oregon Inheritance Law
Intestate succession in Oregon if there is no surviving child or spouse is arranged as in the chart below:
|Intestate Succession: Spouses and Children|
|Inheritance Situation||Who Inherits Your Property|
|Parents but no spouse or descendants||– Parents inherit everything|
|Siblings but no spouse, descendants or parents||– Siblings inherits everything|
If you leave a spouse, children, grandchildren, parents, grandparents, siblings, nieces, nephews, aunts, uncles or cousins, they will inherit in the order laid out in the chart.
Even with this extensive intestate process ready to back you up and ensure that your family inherits your estate, it’s still highly recommended that you build your own testate will so that you remain in full control of your property’s disposition. That way you can ensure that all of your property ends up in the hands you want it in.
Non-Probate Oregon Inheritances
Some assets are not part of the probate process in Oregon, and are therefore not affected by intestate succession laws. Some examples of valuable assets that don’t go through your will are:
- Any items in a living trust
- Life insurance policies
- 401(k)s, IRAs, or other retirement accounts
- Pay-on-death bank accounts
- Real estate held by transfer-on-death or beneficiary deed
- Joint tenancy real property
This property will pass to the beneficiary you named, or to the surviving co-owner, even if you do not have a will.
Other Situations in Oregon Inheritance Law
There are some other aspects you might want to know about Oregon inheritance laws. Like most states, a person who kills or abuses you cannot inherit your estate. Another common inheritance law Oregon also adheres to is treating half-blood relatives the same as full-blood relatives. For example, your half-sibling would get the same share as any other sibling.
Immigration status is irrelevant when it comes to inheritance. If a relative of yours is entitled to a share of your assets, they can inherit no matter what their citizenship status is. In order to inherit under Oregon’s intestate succession law, the heir in question must survive the decedent by at least 120 hours.
If you give an heir property during your lifetime, the value of that gift can be subtracted from your relative’s share, but only if it is in writing at the time the gift was made, or if the heir admits it in writing.
Tips for Estate Planning
- Consider talking to a financial advisor about estate planning. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
- Doing estate planning entails using terms that may be unfamiliar to you. Here is a list of 10 key terms that will help you sort through your options and also be useful as you make personal financial decisions in other areas. If you decide to set up a living trust in Oregon here is a helpful guide to what you need to do.
Photo credit: ©iStock.com/HaizhanZheng, ©iStock.com/jose1983, ©iStock.com/GomezDavid