For families and individuals in Oregon and Washington with more net wealth that the state’s estate tax exclusion limit, gifting is a key strategy to reduce the size of your taxable estate while supporting your loved ones during your lifetime. With Oregon’s inheritance tax threshold of just $1 million and Washington’s estate tax threshold of $2.19 million, thoughtful gifting can help you avoid or minimize estate taxes at the state and federal levels. Below are strategies to consider as part of your estate plan.
1. Leverage the Annual Gift Tax Exclusion
First, understand this – there is NEVER a tax on gifts. There is no tax for the giver and no tax for the receiver. There are big misunderstandings out there about this, but trust us, there are no taxes on gifts.
In 2025, the “no reporting limit” for gifting allows you to give up to $19,000 per recipient per year (therefore $38,000 per recipient per year for a married couple) without triggering the need to report the gift to the IRS at all. If you gift above that amount, you have to report the gift, and it will use up some of your Federal lifetime gift and estate tax exemption. Most people don’t care about hitting that Federal lifetime exemption limit, which is 2025 is $12.92 million per individual (or $25.84 million for married couples).
• Example: In 2025, you can gift $19,000 to each of your three children and five grandchildren, removing $152,000 from your taxable estate in a single year and you don’t even have to report it to the IRS – it’s like a check at Christmas.
• Pro Tip: Consistent annual gifting under the “no reporting limit” over time is an effective way to reduce the size of your taxable estate while benefiting your loved ones, but only if you have the time left to do it. Some families need to gift bigger and faster to reduce their estate size rapidly.
2. Direct Payments for Education or Medical Expenses
You can pay qualified education expenses (like tuition) or medical bills directly to the institution or provider without affecting your gift tax exclusion or lifetime exemption.
• Example: Covering your grandchild’s tuition or a family member’s medical expenses reduces your taxable estate and provides immediate, meaningful assistance. Paying these expenses for family members does not even count toward your annual no reporting limit gifting amount.
3. Use the Lifetime Gift and Estate Tax Exemption
The federal lifetime gift and estate tax exemption for 2025 is $12.92 million per individual ($25.84 million for married couples). You can use this exemption during your lifetime to make substantial gifts without incurring gift tax. Some families need to gift large sums quickly to bring their estate size down. The only difference between gifting above versus gifting under the annual no reporting limit is that you have to tell the IRS via a special form. They’ll then subtract that from your lifetime exemption, which is so high that most people aren’t worried about hitting it anyway.
• Strategy: Consider gifting now to lock in today’s high exemption amounts. They are scheduled to decrease in 2026 unless Congress acts. While we expect the very high limits to remain for at least a few more years, the exemption is currently at a historic high ((the Federal limit was only $2 million up until 2008).
• State Tax Implications: While Oregon and Washington also do not tax gifts, in fact they generally don’t even require reporting them at all. This is why we recommend large lifetime gifts to reduce estate taxes if you live in OR or WA.
4. Create Irrevocable Trusts
Trusts are especially valuable in Oregon and Washington, where estate tax thresholds are lower than the federal exemption.
• Irrevocable Life Insurance Trust (ILIT): Removes life insurance proceeds from your taxable estate, ensuring they pass tax-free to your beneficiaries. An ILIT can also provide liquidity for paying estate taxes without selling off family assets.
• Grantor Retained Annuity Trust (GRAT): Allows you to transfer appreciating assets to beneficiaries at a reduced tax cost while retaining an income stream for a specific period.
• Family Trusts: We recommend revocable living trusts for anyone who lives in Oregon or Washington to allow for the private, quick, and simple transfer of real estate, business interests, and bank accounts. Planning a family trust is a gift to you and your heirs. Taking an estate through probate makes mourning even more difficult and creates greater opportunity for conflict.
5. Gift Appreciating Assets
Gifting assets that are likely to appreciate in value, such as real estate, stock, or business interests, removes future growth from your taxable estate. That said, estate tax is much lower than capital gains tax, so we don’t recommend gifting property with low “basis,” i.e. a low original cost.
• Example: Gifting $1 million in real estate or stock today that appreciates to $2 million over time prevents the growth from being taxed as part of your estate.
• Caution: Keep in mind that recipients assume your cost basis if you gift them an asset with a basis. That means they’ll be hit with big capital gains taxes if they sell the asset later. Rather, when an heir inherits an asset with a basis, they get a new “stepped up” basis at the current market value. This is a powerful tool for estate planning.
6. Charitable Gifting
Charitable giving can reduce your taxable estate while supporting causes you care about. Oregon and Washington offer additional incentives for charitable contributions.
• Donor-Advised Funds (DAFs): Contribute to a DAF to receive an immediate tax deduction while recommending grants to charities over time.
• Charitable Remainder Trusts (CRTs): Transfer assets into a trust, receive an income stream during your lifetime, and leave the remainder to charity at your passing, reducing both estate and income taxes.
7. Intra-Family Loans and Forgiveness
Structured intra-family loans allow you to support loved ones financially while reducing your taxable estate over time.
• Strategy: Make low-interest loans to family members for major expenses, such as buying a home or starting a business. Each year, forgive portions of the loan using your annual gift tax exclusion, effectively turning the loan into a tax-free gift.
Oregon and Washington Estate Tax Considerations
Oregon and Washington impose estate taxes with much lower thresholds than the federal level:
• Oregon: A 10%-16% estate tax applies to estates over $1 million (in 2025).
• Washington: A 10%-20% estate tax applies to estates over $2.19 million (in 2025).
It is generally those limits that Oregonians and Washingtonians are concerned with, not the higher Federal limit. Simply owning a home in a pricy part of Oregon can put you over Oregon’s estate tax exemption limit. Careful gifting can reduce the size of your estate to avoid or minimize these state-level taxes. Additionally, trusts and lifetime giving strategies can help mitigate the impact of state-specific rules.
Start Planning Today
Navigating gifting strategies and estate tax rules in Oregon and Washington requires careful planning. Our firm specializes in creating tailored estate plans to help you reduce taxes, transfer wealth efficiently, and preserve your legacy. Contact us today to schedule a consultation and take the next step in securing your family’s future.
Note: This article is for informational purposes only and does not constitute legal advice. For personalized guidance, please consult with a qualified attorney.