Chapter 124 Oregon Laws 2005

AN ACT

HB 2469

Relating to the treatment of marital property for inheritance tax purposes; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Sections 2 to 4 of this 2005 Act are added to and made a part of ORS 118.005 to 118.840.

SECTION 2. (1) For purposes of computing the tax imposed under ORS 118.010, the taxable estate to be used for computing the maximum amount of the state death tax credit allowable under section 2011 of the Internal Revenue Code shall be the taxable estate determined for federal estate tax purposes, reduced by the value on the date of death of the decedent of all Oregon special marital property in the estate.

(2) Oregon special marital property consists of any trust or other property interest, or a portion of a trust or property interest:

(a) In which principal or income may be accumulated or distributed to or for the benefit of only the surviving spouse of the decedent during the lifetime of the surviving spouse;

(b) In which a person may not transfer or exercise a power to appoint any part of the trust or other property interest to a person other than the surviving spouse during the lifetime of the surviving spouse; and

(c) For which the executor of the estate of the decedent has made the election described in section 3 (1) of this 2005 Act.

(3) If a trust or other property interest would qualify as Oregon special marital property under subsection (2) of this section except that the trust or other property interest allows principal or income to be distributed to other persons in addition to the surviving spouse, the executor may elect to set aside a share of the trust or other property interest as a separate share of the trust or property interest or as a separate trust, which shall qualify as Oregon special marital property if:

(a) The executor makes the election described in section 3 (1) of this 2005 Act;

(b) Each beneficiary who is living at the time the election is made and who may be entitled to a distribution from the share during the lifetime of the surviving spouse makes the election described in section 3 (2) of this 2005 Act;

(c) The surviving spouse makes the election described in section 3 (2) of this 2005 Act; and

(d) All elections are attached to the inheritance tax return filed with respect to the estate of the decedent, or are filed or maintained as records as otherwise prescribed by the Department of Revenue by rule.

SECTION 3. (1) The executor of an estate containing property that the executor seeks to qualify as Oregon special marital property under section 2 of this 2005 Act shall make an election under this subsection in order for the property to be Oregon special marital property. The election shall be made:

(a) By attaching a statement to the inheritance tax return for the estate of the decedent that identifies the trust or other property interest that constitutes Oregon special marital property and that affirms that the identified property meets the requirements of Oregon special marital property under section 2 of this 2005 Act and will be administered as required under section 2 of this 2005 Act; or

(b) In such other manner as the Department of Revenue prescribes by rule.

(2) For a trust or other property interest described in section 2 (3) of this 2005 Act, in order for any portion of the trust or other property interest to be Oregon special marital property, in addition to the election of the executor described in subsection (1) of this section, the surviving spouse and each beneficiary who is living at the time of the election and who may be eligible for a distribution from the trust or other property interest during the lifetime of the surviving spouse shall make an election and written consent that is in substantially the following form:

____________________________________________________________________________

CONSENT TO ESTABLISHMENT OF

OREGON SPECIAL MARITAL PROPERTY

(a) ELECTION TO BE SIGNED BY ALL BENEFICIARIES EXCEPT THE SURVIVING SPOUSE: Each of the undersigned acknowledge and consent to a portion of the ________ (name of trust or other property interest) being set aside as a separate share or trust in order to qualify for the Oregon special marital property election in accordance with section 2 of this 2005 Act, for the primary purpose of reducing or eliminating the Oregon inheritance tax due on the estate of ________ (name of decedent). The undersigned together with the surviving spouse constitute all of the persons living on the date of this election who may be entitled to a distribution during the lifetime of the surviving spouse from the ________ (name of trust or other property interest). Each of the undersigned, both on behalf of the undersigned and on behalf of the unborn lineal descendants of the undersigned, irrevocably agrees to release all rights to distributions from the Oregon special marital property during the lifetime of the surviving spouse. Each of the undersigned agrees that all other provisions of the ________ (name of trust or other property interest) shall remain in effect and that, upon the death of the surviving spouse, any remaining Oregon special marital property shall be distributed as otherwise provided in the trust or other property interest.

Signature of: ________(beneficiary)

(b) ELECTION TO BE SIGNED BY THE SURVIVING SPOUSE: I am the surviving spouse of ________ (name of decedent). I acknowledge and consent to a portion of the ________ (name of trust or other property interest) being set aside as a separate share or trust in order to qualify as Oregon special marital property under section 2 of this 2005 Act, for the primary purpose of reducing or eliminating the Oregon inheritance tax due on the estate of ________ (name of decedent). I, together with all of the other individuals executing the election in accordance with section 2 of this 2005 Act, constitute all of the persons living on the date of this election who may be entitled to a distribution from the Oregon special marital property to which this election applies and who might be entitled to a distribution during my lifetime. I agree that all other terms, conditions and provisions that apply to the ________ (name of trust or other property interest) shall apply to the Oregon special marital property to which this election applies, and that upon my death, any remaining Oregon special marital property shall be distributed as otherwise provided in the trust or other property interest.

Signature of: ________

(surviving spouse)

SUBSCRIBED AND SWORN TO before me this ___ day of___, 2___.

__________

Notary Public of Oregon

My commission expires: ______

____________________________________________________________________________

(3) Elections made under this section are irrevocable.

(4) The custodial parent or court appointed guardian of a minor beneficiary may sign the election on behalf of the minor beneficiary and the unborn lineal descendents of the minor beneficiary.

SECTION 4. For purposes of computing the tax imposed under ORS 118.010, the gross estate of a decedent who was a surviving spouse with respect to property that is Oregon special marital property under section 2 of this 2005 Act shall include the Oregon special marital property, valued as of the date of death of the surviving spouse.

SECTION 5. (1) An Oregon inheritance tax return that is filed with respect to a death occurring on or after January 1, 2002, and before the effective date of this 2005 Act, may be amended to make the elections described in sections 2 and 3 of this 2005 Act on or before the later of:

(a) December 31, 2006; or

(b) The deadline otherwise prescribed by law for the filing of an amended inheritance tax return.

(2) An inheritance tax return that is originally filed on or after the effective date of this 2005 Act may be amended to make the elections described in sections 2 and 3 of this 2005 Act as otherwise prescribed by law.

(3)(a) If a refund is made as the result of the filing of an amended return that is allowable because of the date for filing amended returns under subsection (1)(a) of this section, the refund may not bear interest, unless the refund is made on or after March 1, 2007.

(b) A refund described in paragraph (a) of this subsection that is made on or after March 1, 2007, and attributable to the elections described in sections 2 and 3 of this 2005 Act shall bear interest as prescribed in ORS 305.220, for the period beginning March 1, 2007, and ending on the date the refund is made.

(4) Once made, an election described in sections 2 and 3 of this 2005 Act is irrevocable.

SECTION 6. This 2005 Act takes effect on the 91st day after the date on which the regular session of the Seventy-third Legislative Assembly adjourns sine die.

Approved by the Governor June 6, 2005

Filed in the office of Secretary of State June 7, 2005

Effective date November 4, 2005

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