Oregon vs. Federal Estate Tax—Two Systems, One Estate

Oregon residents planning their estate often ask: “Do I need to worry about estate taxes?” And the answer depends entirely on which system we’re talking about—Oregon or federal.

The two systems are separate. They operate on different thresholds, use different rules, and don’t always coordinate well. For Oregon families who’ve worked hard, saved responsibly, and now own real property or a retirement nest egg, the state system can create surprises—especially if you’re relying on national estate planning advice that assumes federal limits apply across the board.

Let’s walk through the key differences and what they mean for your estate plan.

Oregon Estate Tax: $1 Million and Counting

Oregon imposes an estate tax on estates with a gross value over $1 million. That includes:

• Your home

• Retirement accounts

• Life insurance (if you own the policy)

• Bank accounts and investments

• Business interests

• Personal property, collectibles, vehicles, and more

If your estate exceeds $1 million in value, your personal representative is required to file an OR706 estate tax return. The tax applies only to the portion of your estate above $1 million, and rates range from 10% to 16%, depending on the total value.

This $1 million threshold has not increased since 2006. That’s part of why it affects so many Oregonians today—especially homeowners in Eugene, Bend, or Portland.

Federal Estate Tax: For the Very Wealthy—For Now

At the federal level, the estate tax applies only to estates over $13.99 million per person (as of 2025), or $27.98 million for a married couple with proper planning.

If your estate is below that level, you won’t owe federal estate tax. You may not even need to file a return.

But here’s the catch: the current exemption is scheduled to sunset in 2026, dropping by about half unless Congress acts. That would bring the individual exemption closer to $7 million—still high, but not untouchable for business owners, farmers, or high-value property owners.

So while the federal estate tax feels remote today, that could change—especially if you’re thinking about long-term legacy planning.

The Two Systems Don’t “Talk”

Oregon and the IRS don’t share a tax structure, and they don’t coordinate exemptions. That means:

• You could owe Oregon estate tax even if you owe nothing federally

• There’s no Oregon “portability” between spouses unless you plan for it

• A federal estate tax return (Form 706) may not be required, even when the OR706 is

• Oregon doesn’t conform to the federal lifetime gift tax structure—Oregon has no gift tax, but still includes gifted assets in the gross estate under certain circumstances

In other words: don’t assume your federal estate plan covers your state-level exposure. It doesn’t.

Examples in Practice

Scenario A: Oregon Liability, No Federal Tax

Sarah owns a house worth $800,000, an IRA with $250,000, and a life insurance policy worth $200,000.
Total estate value: $1.25 million

• Oregon: Estate tax return required; likely taxable

• Federal: No tax owed; no return required

Scenario B: Married Couple, No Planning

John and Laura have a combined estate worth $1.9 million. John dies first, leaving everything to Laura.
Because Oregon does not allow automatic portability of the exemption, John’s $1 million exemption is wasted.

When Laura dies, her estate is now $1.9 million and only the first $1 million is exempt—leaving the rest exposed to tax.

How to Plan Across Both Systems

If your estate may brush up against either threshold, or if you simply want to avoid unnecessary tax exposure, you can:

1. Preserve Both Spouses’ Exemptions

Use credit shelter trusts (also called bypass or AB trusts) to preserve the first spouse’s exemption from Oregon tax. This keeps your family from losing half the available protection.

2. Track the 2026 Federal Sunset

If you’re in the $6–13 million range, now is the time to review your plan. The exemption cut could bring you into federal tax territory with no changes to your actual estate.

3. Gifting with Care

Oregon has no gift tax. Use lifetime gifting intentionally, and always coordinate with your overall estate plan.

4. Life Insurance Planning

Life insurance death benefits are included in your taxable estate if you own the policy. Transferring the policy to an irrevocable trust (ILIT) can remove the benefit from the calculation.

5. Charitable Giving

Charitable bequests reduce taxable estate value. Larger estates can also benefit from planned giving structures like donor-advised funds or charitable remainder trusts.

Final Thought

Estate tax isn’t just a federal issue. In Oregon, the $1 million threshold means that many middle-class families face state-level tax obligations—often without realizing it.

And if your plan was built around federal rules, it may offer zero protection from Oregon tax.

Good estate planning considers both systems, not just the bigger number. If your estate includes real property, life insurance, or business interests—and you’d prefer your heirs keep more of what you’ve built—I can help you put a smart plan in place.

You can schedule your free consultation here, or learn more about flat-fee estate planning that works under both state and federal law.