Significant Changes to Washington State Estate Tax Structure

The Washington State legislature has recently enacted significant changes to the estate tax system. These changes will impact individuals in Washington and beyond.

Understanding the Estate Tax Changes

For Texas readers: there is no estate or inheritance tax. Your main concern, along with residents from other states, is the federal estate tax. The current federal exemption is substantial, at $13.99 million per person. However, this exemption is set to decrease to approximately $6 million per individual starting in 2026. While Congress may consider maintaining the higher exemption, it will be part of a broader debate on tax and spending policies.

Key Changes in Washington Estate Tax

Here are the crucial details regarding the updates to Washington's estate tax:

• Increased Exemption: The exemption amount, which refers to the portion of an estate not subject to state estate tax, is raised from $2.193 million to $3 million. Estates valued at or below this new threshold will no longer have to pay Washington estate tax or file a Washington estate tax return.

  
  

• Annual Inflation Adjustment: Beginning January 1, 2026, the $3 million exemption will be adjusted annually for inflation. Although the law has always provided for this adjustment, technical wording issues previously hindered it. The Consumer Price Index (CPI) used for calculations was no longer provided for the specified region. The 2025 amendment redefined the region as "the Seattle metropolitan area," allowing the inflation adjustment to resume. This increase compensates for years of previous missed adjustments.

  
  

• Higher Tax Rates for Large Estates: The top marginal rate for estates valued over $9 million has increased from 20% to 35%. This makes Washington's estate tax some of the highest in the nation for larger estates. However, a $3 million deduction for qualified family-owned business interests has been introduced, which lessens the tax burden for certain business owners.

  
  

Why You Should Act Now

Washington residents with estates valued below $3 million will benefit from these new laws. Those with estates valued close to or exceeding $3 million should review their estate plans carefully. With the increased rates on larger estates, it's crucial to ensure that your strategies align with these changes. Both Texans and Washingtonians with estates near or above $6 million should seek professional advice concerning the effect of adjustments in the federal estate tax exemption.

Legal Strategies to Reduce Estate Tax

There are several legal methods to reduce or eliminate estate tax obligations. Each strategy, however, comes with its advantages and disadvantages. For married couples, utilizing a bypass trust could effectively double the exemption amount, minimizing or eliminating tax liabilities.

If the value of your home, savings, retirement accounts, investments, or life insurance could potentially subject your estate to taxation, act now. Schedule a Zoom video consultation to discuss and optimize your estate planning under the current tax laws. Visit our online scheduler at www.Premack.com.

The Importance of Estate Planning

Estate planning is a crucial and often overlooked aspect of financial well-being. It involves making decisions about how your assets will be distributed after your passing. Proper planning can help ensure that your loved ones are supported according to your wishes, and it can significantly minimize tax burdens.

To secure your financial legacy, start the estate planning process as soon as possible. Keep in mind the potential future changes in tax laws, both state and federal. This can help you stay ahead and safeguard your family’s future.

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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