A while ago, a friend was discussing organizing their parents' house and suddenly lowered their voice. They mentioned that with just one house and a small retirement account, they might have to pay inheritance tax to the state of Oregon.

At first, I couldn't believe it. I thought inheritance tax was only for people with assets worth billions.

But when I looked up the numbers, it was no joke. The exemption threshold for Oregon's inheritance tax (specifically, the estate tax) is $1 million.

There are 12 states that collect inheritance tax, excluding Washington D.C., and Oregon has the lowest threshold among them. Moreover, this $1 million amount hasn't increased with inflation and has remained the same for over a decade.

When you compare it, the difference is striking. The federal exemption amount for inheritance tax will be $15 million per person starting in 2026.

This amount was confirmed by the One Big Beautiful Bill Act passed last summer and will be adjusted for inflation in the future. This means that most households are far from facing federal inheritance tax.

Let's look at neighboring states. Massachusetts raised its threshold to $2 million in 2023, and Washington state is at $3 million.

So, it's entirely possible for a household that pays no federal tax to end up paying taxes in Oregon. This is the key point.

The tax rate ranges from 10% to 16%, increasing in brackets. It is calculated on the amount exceeding $1 million.

For example, if the taxable estate is $1.5 million, the tax would be $50,000. If it's $2 million, it goes up to $101,250.

Honestly, I was a bit shocked when I saw these numbers. Considering the home prices in urban Oregon, just one house plus a 401(k) and life insurance can quickly add up to $1 million.

The estate being referred to includes the market value of the house, savings, stocks, retirement accounts, and life insurance benefits in the owner's name. It doesn't mean you need to have $1 million in cash to be affected.

Many Korean families have their assets tied up in their homes. So, as home prices rise, concerns about inheritance tax have also increased.

Another important point to know is portability. At the federal level, the surviving spouse can inherit the unused exemption amount from the deceased spouse.

Oregon does not allow this. Even for married couples, each can only apply for $1 million separately, so thinking of it as a combined $2 million would lead to incorrect calculations.

The reporting criteria can also be confusing. If the total estate (gross estate) at the time of death exceeds $1 million, you must file Form OR-706.

The deadline is 12 months from the date of death. You can request a 6-month extension with OR-706-EXT, but remember that this does not automatically extend the tax payment deadline.

Will this threshold change? Earlier this year, a bill called SB 1511 was introduced during a short session.

It proposed raising the reporting threshold to $2.5 million and linking it to inflation, while increasing the tax rate on larger estates to a maximum of 19.9%. The Senate passed it in February with a vote of 22 to 5.

However, it did not progress further in the House Revenue Committee before the session ended. So, as of now, the threshold remains at $1 million.

Both sides of the argument have valid points. Supporters argue that as home prices rise, even middle-class families are getting caught by the tax, so the threshold needs to be updated.

On the other hand, concerns about revenue cannot be ignored. This tax generates nearly $1 billion every two years, so raising the threshold would require compensating with higher rates.

Business groups and Republicans advocate for either complete repeal or raising the threshold further. Unions have opposed linking it to inflation.

In my opinion, linking the threshold to inflation is a reasonable direction. Treating retirees with just one home as wealthy is unreasonable based on the data.

However, it's hard to predict when politics will change. So, I believe it's best to prepare based on the current rules.

If I had assets in Oregon, I would first calculate the total value of my house, retirement accounts, and insurance benefits. It's most dangerous to assume that my home is not affected.

Next, I would consider whether options like a living trust or gifting are suitable for my situation. For couples, preserving each person's exemption amount is especially important.

Inheritance outcomes can vary greatly depending on personal circumstances, so it's essential to consult with an estate planning attorney or tax professional. The Oregon Department of Revenue website also has information on OR-706.

It only takes about an hour to check one number. Considering that one hour could save your children thousands of dollars, there's no reason to delay.

I plan to organize my numbers this weekend. Let's not wait until it's too late, I mean it.