One of the most surprising revelations that many of my clients experience is the fact that estate/inheritance taxes will be due upon their death, unless they do some planning. These clients have been convinced that estate/inheritance taxes only affect the rich, and since they do not perceive themselves as rich, they have nothing to worry about.
What these clients don’t realize, until our initial meeting, is what all is included in their taxable estate. The asset most often left out is proceeds from life insurance. If you have a million dollar life insurance policy, and you also have other assets, you will pay inheritance tax in Oregon, which has only a $1 million exclusion.
The second asset most often forgotten is retirement plans. These amounts are not only included in your taxable estate, and therefore subject to the estate tax, but they are also, without proper planning, potentially subject to income taxes.
The third asset that people seem to forget when calculating their taxable estate is equity in their real property. This one may seem more surprising than the others, but it happens quite frequently.
Fourth, there are assets that client’s have received from their parent’s estate planning, such as family limited partnership interests, that they tend to forget about.
For those who don’t relish the idea of paying more taxes than is required (and I have yet to meet someone who does), I recommend having a long discussion with your estate planning attorney about what is included, and what the estate tax exemptions are currently (see earlier posts about changes in the federal estate tax exemption).