Oregon Estate Tax Planning
Last updated: 23 Oct 2025 • Author: Alexander Foelsche CPA (US), WP (DE), RE (CH)
Oregon Estate Tax — Planning Guide
Oregon’s estate tax threshold of $1,000,000 is among the lowest in the U.S., which means even moderately sized estates may face state-level estate tax exposure. This guide summarizes the main planning opportunities for individuals, families, and advisors, including residency structuring, use of deductions, Natural Resource Credit strategies, and lifetime transfers.
1. Threshold awareness and base structuring
- Threshold: $1,000,000 fixed—no inflation adjustment.
- Graduated rates: 10%–16% depending on taxable amount.
- No portability: Unlike the federal estate tax, Oregon does not allow the surviving spouse to use the deceased spouse’s unused exemption.
- Plan early: Clients with estates over ~$1M (including real estate) should model potential state liability well in advance.
2. Deductions and marital planning
Marital deduction
Oregon allows a full marital deduction for assets passing to a surviving spouse, but state QTIP elections require filing an OR-706 even if no tax is due. A state-only QTIP may differ from the federal election, and once made, it is irrevocable.
Charitable deduction
Charitable bequests are deductible under Oregon law to the extent allowed federally. Confirm that the organization qualifies under both federal and Oregon definitions to preserve the deduction.
3. Lifetime gifting
Oregon has no separate gift tax, but lifetime gifts do not reduce the state taxable estate threshold—Oregon’s estate tax is based solely on assets owned at death. Strategic gifting before death can lower the taxable base, but watch for retained interests or step-up consequences.
- Consider annual exclusion gifts to shift appreciation out of the estate.
- Use irrevocable trusts or family LLCs to manage future growth outside the taxable base.
- Be cautious: certain transfers within one year of death may still be pulled back into the estate if done without adequate consideration.
4. Natural Resource Credit
Oregon’s Natural Resource Credit (NRC) under ORS 118.140 can reduce or eliminate estate tax attributable to qualifying farm, forest, or natural resource business property.
- Ownership/use requirements: 5 of the 8 years prior to death.
- Eligible property: Farmland, timberland, or active business interests located in Oregon.
- Post-death requirements: Heirs must continue to own and use the property for at least 5 additional years.
- File with Schedule OR-706-NRC and supporting appraisals.
Example: A family-owned timber tract worth $3M may qualify for an NRC reducing Oregon estate tax by several hundred thousand dollars if eligibility rules are satisfied.
5. Residency and situs planning
- Only Oregon-situs property is taxable for nonresidents.
- Residency-based exposure can be reduced by relocating domicile (must be genuine: new home, driver’s license, voter registration, etc.).
- Nonresidents owning Oregon property can use separate ownership structures (LLCs, partnerships) to help clarify situs and limit probate complications—but such structuring must have economic substance.
6. Coordination with federal estate planning
Federal vs. state exclusion mismatch
Because the federal exclusion is far higher ($13.61 million in 2024) than Oregon’s $1 million, many estates owe no federal tax but do owe Oregon estate tax. Estate plans must therefore be state-sensitive.
QTIP coordination
If both federal and Oregon QTIP elections are relevant, confirm alignment or file a state-only election as needed. Documentation consistency is key to avoid disallowance on audit.
7. Checklist for advisors
During life
- Track Oregon-situs assets and evaluate relocation or gifting.
- Maintain documentation for farm/forest use to preserve NRC eligibility.
- Model estate values annually for Oregon exposure.
At death
- File OR-706 within 9 months if threshold exceeded.
- Consider state QTIP for surviving spouse.
- Prepare NRC documentation early; DOR review is rigorous.