Napier & Company, LCC

Estate taxes have been an area with some activity and change in recent years so we wanted to provide an update of what is going on in this area of the tax law. We will start with what is currently in place.

Federal Estate Tax Law Exemption

The federal estate tax exemption has increased from $2,000,000 to $3,500,000 for 2009. The estate tax is currently scheduled to be repealed in 2010 and then reinstated in 2011 with an exemption amount of $1,000,000.

Oregon Estate Tax Exemption

The Oregon estate tax exemption remains at $1,000,000. This means that an estate may be subject to Oregon estate tax even if it is not subject to federal estate tax. Each state sets its own exemption level.

Gift Tax

The annual exclusion has increased from $12,000 to $13,000 for 2009. Thus in 2009, each person may now transfer up to $13,000 to an unlimited number of individuals free of gift tax.

The lifetime exemption for gift tax remains at $1,000,000. As such, the federal gift tax exemption is not equal to the federal estate tax exemption. This may also change with new tax laws.

What may the future look like?

Bill No. 436 introduced into the house could have a substantial impact on the estate tax. Some of the key changes that are proposed follow:

• No estate tax repeal in 2010. This is hardly surprising.
• The federal exemption would stay at this year’s amount of $3.5 million.
• The maximum estate tax rate would be frozen at the current 45%.
• For estates over $10 million the exclusion will be phased out.
• No discounts on non-business and passive assets.

This is not the only bill that Congress will be looking at, but it does give us an idea of what the future of estate tax laws may look like. We will keep you informed of changes in this area through our Enews alerts and newsletters