2025 Estate Tax Update

The Washington State legislature has passed, and the Governor has signed, significant changes to the state’s estate tax structure.

For my Texas readers: there is no estate or inheritance tax in Texas. Your concern, along with residents of Washington and other states, is the federal estate tax. While the 2025 federal exemption is generous ($13.99 million per person) the law is scheduled to reduce the exemption to about $6 million per individual at the start of 2026. Congress may vote to keep the higher exemption, but the vote will be over wide-ranging tax and spending issues, not just this extension.

In Washington state, the estate tax changes include an increased exemption amount for individuals dying on or after July 1, 2025, and a higher top tax rate for estates over $9 million. Details are as follows:

• Increased Exemption: The exemption amount—the portion of an estate not subject to state estate tax—has been raised from $2.193 million to $3 million. Estates valued at or below $3 million will no longer owe Washington estate tax nor will they need to file a Washington estate tax return.

  
  

• Annual Inflation Adjustment: Starting January 1, 2026, the $3 million exemption will be adjusted annually for inflation. Oddly, the law has always provided for an inflation adjustment, but the wording of the statute caused a hitch. The adjustment was calculated by applying the Consumer Price Index (CPI) for a specified region, but the federal Census Bureau stopped calculating the CPI for that specified region. Hence, there was no way to calculate the inflation adjustment. This was fixed in the 2025 amendment by using broader wording to describe the census region (“the Seattle metropolitan area”) which revived the annual inflation adjustment of the exemption. Jumping the exemption from $2.193 million to $3 million compensated for those years of missed adjustments.

  
  

• Higher Tax Rates for Large Estates: The top marginal rate for estates larger than $9 million has increased from 20% to 35%. This makes Washington’s estate tax among the highest in the nation for these larger estates. Even so, the law now provides a $3 million deduction for qualified family-owned business interests, reducing the estate tax burden on certain business owners.

Soon, Washington residents’ estates valued below $3 million will no longer be subject to this tax. But all individuals and married couples with estates valued near or above $3 million should review their estate plans to prepare for higher rates on larger estates. Additionally, both Texans and Washingtonians with estates near or above $6 million should be consulting with me about the potential impact of changes in the federal estate tax exemption.

There are several legal ways to reduce or eliminate the estate tax, but each strategy has both pros and cons. For married couples, the use of a bypass trust can potentially double the exemption amount to reduce or eliminate the tax. If you suspect that the value of your home, your savings and retirement accounts, your investments, and your life insurance may expose your estate to taxation, schedule a Zoom-video planning consultation today to ensure your estate plan is optimized under the tax laws. Visit our online scheduler at www.Premack.com.

Paul Premack is a Certified Elder Law Attorney specializing in Wills and Trusts, Probate, and Elder Law issues. He is licensed to practice law in Texas and Washington. To contact us, visit www.Premack.com.

Column published on June 4, 2025