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Estate Taxes

It used to be that estate taxes were a primary focus of estate planning both in Oklahoma and nationwide. However, the estate planning landscape has changed significantly in recent years. Oklahoma repealed its estate tax effective for deaths occurring on or after January 1, 2010. Consequently, you won’t owe any estate taxes to the Oklahoma state government regardless of how large your estate is. What’s more, Congress passed and the President signed the American Taxpayer Relief Act of 2012, commonly referred to as ATRA. There are two key components to ATRA. First, ATRA permanently set the federal estate tax exemption at $5 million, to be indexed annually for inflation (in 2015, the federal estate tax exemption is $5.43 million). This means estates valued at less than the exemption amount will not be subject to the payment federal estate taxes. In addition, ATRA permits what’s known as portability for married couples; whenever the first spouse to die passes away, the surviving spouse can elect to use the deceased spouse’s unused exemption amount to increase their own federal estate tax exemption. The practical effect is that married couples could have a federal estate tax exemption of up to $10.86 million in 2015.

Given these changes in federal and state law, concerns such as providing for a client’s incapacity, protecting a child’s inheritance from lawsuits and creditors and maintaining privacy while avoiding probate have taken precedence over estate taxes in estate planning. That said, one must keep in mind that both federal and state laws can and do change. Furthermore,  it’s important to get an accurate picture of the size of your estate. Oftentimes, people do not account for the value life insurance policies or an anticipated inheritance of their own in estimating what their net worth will be at death. An estate planning attorney can help you sort through all of these issues to make sure that the benefits of your estate plan are passed on to your family and loved ones.