Under the 2025 tax law, the federal estate and gift tax exemption is $15 million per person in 2026, indexed for inflation after that. Most families will never owe federal estate tax. State estate tax is a different story, especially in Oregon.
Oregon: a $1 million exemption
Oregon taxes estates over $1 million. The threshold isn't indexed for inflation, so as home values and retirement accounts have grown, more and more middle-class and professional families have crossed it. Rates are graduated from 10% up to 16% on the largest estates.
- A paid-off Portland-area home, retirement accounts and life insurance can easily total more than $1 million.
- Oregon doesn't offer portability, so a married couple can't automatically combine two exemptions the way they can at the federal level.
- Nonresidents can owe Oregon estate tax on Oregon real estate and tangible property, such as a vacation home in Bend or on the coast.
Washington: no income tax, but an estate tax
Washington's estate tax applies to estates above an exclusion amount that was raised to $3 million for deaths on or after July 1, 2025, and indexed for inflation going forward. Washington's rates are among the highest in the country, rising to 35% on the largest estates.
Families who move from Oregon to Washington for the lack of income tax sometimes overlook that they still live in an estate tax state.
Planning strategies that help
- Credit shelter (bypass) trusts. Because state exemptions aren't portable, a trust that holds assets at the first spouse's death can preserve that spouse's state exemption.
- Lifetime gifts. Gifts to children or trusts can move assets and their future growth out of a state-taxable estate.
- Charitable planning. Bequests to charity are deductible, and charitable remainder trusts can provide income while reducing the estate.
- Out-of-state property. How you own a vacation home or rental in another state can determine whether that state taxes it at death.
- Life insurance ownership. An irrevocable life insurance trust keeps the death benefit out of the taxable estate.
Don't forget the step-up in basis
Assets held until death generally get a new cost basis equal to their value at death, wiping out built-in capital gains. Gifting a highly appreciated asset during life gives up that step-up. The right choice depends on the size of the gain, the estate tax rate you'd avoid and how long the recipient will hold it.
What to do now
- Add up your estate, including your home, retirement accounts, business interests and life insurance.
- Review how assets are titled and who the beneficiaries are.
- Ask whether your current documents include state-specific planning, especially if they were drafted elsewhere.
- Revisit the plan after a move, a business sale or the death of a spouse.
The bottom line
For many Northwest families, state estate tax is the one that matters. We work alongside your estate attorney to estimate your exposure, model strategies and coordinate the tax filings, so your plan reflects the rules where you actually live and own property.
This article is general information, not tax, legal or investment advice for your situation. Rules and thresholds change, so please talk with a qualified advisor before acting.
