Washington Estate Tax Legislative Update (updated 3/25/26)

by Paul Premack, CELA

SEE update to this post as of 3/25/26.

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State Capitol of Washington, Olympia

Earlier today (03/03/26) an attorney colleague alerted me to SB 6347 in the Washington legislature. Last year, the Washington estate tax underwent three significant changes: first, the tax rates were dramatically increased to top out at 35%; second, the exemption was raised from approximately $2.2 million to about $3 million; and third, the language was amended to ensure that the exemption could be adjusted for inflation.

Current Legislative Proposal

A new proposal, SB 6347, has been introduced and passed in the state Senate. This bill aims to roll back the recently increased tax rates to the more moderate rates of previous law. Specifically, the maximum rate would return to 20%, which is significantly more tolerable than the current maximum of 35%. The Senate's action represents a positive step toward making the estate tax more manageable for Washington residents.

Amendments in the House Finance Committee

When the bill reached the House Finance Committee, it was amended to revert the exemption amount back to its prior level of about $2.2 million. This would reduce the new exemption from $3+ million, exposing many more residents to the estate tax. Despite the exemption roll-back, the House retained the corrected language ensuring that the exemption could be adjusted for future inflation.

Concerns and Recommendations

In my view, the House should adopt the original Senate bill without amendments. With real estate values at record highs, many "middle class" clients are concerned they may be subject to the Washington estate tax, especially as their fears about the federal estate tax have diminished.

Rationale for Retaining the Higher Exemption

The legislature should lower the tax rates and keep the higher exemption. The 2025 law increasing the exemption from $2,193,000 to $3+ million merely corrected a past wording error that prevented annual inflation adjustments. The original intent was for the exemption to rise with inflation, but the faulty language kept it stagnant. Maintaining the $3+ million exemption would place the exemption amount where it should have been if the language granting the inflation adjustment been correct from the start. Reverting to the old exemption as per the House amendment would deny Washington residents the inflation adjustment originally intended.

Impact on Washington Residents

As an estate planning attorney, I have seen "middle class" clients worry about exposure to the Washington estate tax, especially now that concerns over the federal estate tax have subsided. There are families who have chosen to move to states without an estate tax, like Texas. Keeping the $3+ million exemption, lowering rates, and retaining inflation adjustments would help alleviate these concerns. If the exemption is reduced to $2,193,000, Washington may experience further migration, which could negatively affect the state's economy.

Call to Action

If you are a Washington resident or own real property in the state, I urge you to contact your state representatives and senator. Ask them to support the original SB 6347 without the amendments added by the House Finance Committee. Time will run out in the next few days.

Here is the link to submit comments on the bill: app.leg.wa.gov/pbc/bill/6347  

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UPDATE TO THIS POST AS OF 3/25/26:

The WA legislature amended SB 6347, then voted to pass it as amended. The Governor has promised to sign the bill, which is on his desk as of 3/25/26.

The Good: Tax Rates are Reduced

The updated law does reduce the estate tax rates back to the pre-2026 level. Three dates are now important: (1) for a taxable estate of someone who died before July 1, 2025 the rate tops out at 20%; (2) for a taxable estate of someone who died between July 1, 2025 and July 1, 2026 the rate tops out at 35%, and (3) for a taxable estate of someone who dies after July 1, 2026 the rate once again tops out at 20%.

The Good: the Exemption Increase is Retained (mostly)

The updated law retains the $3 million exemption. Any estate below the exemption amount is not liable for the estate tax.

Actually, the numbers are slightly more complex. The actual exemption varies by date. Anyone who died before July 1, 2025 has a $2,193,000 exemption. Anyone who died between July 1, 2025 and January 1, 2026 has a $3,000,000 exemption. Anyone who died between January 1, 2026 and July 1, 2026 has a $3,076,000 exemption. Anyone who dies after July 1, 2026 goes back to a $3,000,000 exemption.

The Bad: The Inflation Adjustment Dies (again)

The legislature surprisingly reverted the inflation adjustment to the faulty language that was in the prior law.

The prior law said that the exemption amount should be increased based on the Consumer Price Index (CPI) for the Seattle-Tacoma-Bremerton area "as calculated by the United States bureau of labor statistics" (US-BLS). Problem: the US-BLS stopped calculating the CPI for an area called "Seattle-Tacoma-Bremerton". Thus, the Washington Department of Revenue (DOR) decided it could not adjust the exemption for inflation.

The 2025 law fixed the faulty language. It said that the CPI for the "Seattle metropolitan area" should be used, regardless of the label it may be given by the US-BLS. Because of this change, the DOR was able to increase the exemption to $3,076,000 for 2026.

But now, the 2026 law returns to the faulty language. Once again, the CPI for the Seattle-Tacoma-Bremerton" area must be used, and once again the DOR says that because the US-BLS has no such area the DOR cannot adjust for inflation in the future. Add to that the specific requirement in the 2026 law to reduce the exemption amount back to $3,000,000 as of July 1, 2026, and it looks like we'll be stuck at $3,000,000 until the law is fixed.

Why did they go back to the faulty language? Mistake? Sloppiness? Greed? All I know is that the "Final Bill Report on ESB 6347" by legislative staff did not point out that the faulty language ever existed nor that the rolling back the language would re-create the problem. The report simply advised the Senators and Representatives that the 2026 law update "changes the CPI reference to CPI for the Seattle-Tacoma-Bremerton metropolitan area". If they didn't know the history of the faulty language, they wouldn't have known the negative effect of returning to the faulty language.

Perhaps the legislature will re-apply the fix at some future date. Perhaps the DOR will revise its opinion on the faulty language and implement the inflation adjustment anyway. I don't think either of those scenarios are likely. I predict that we'll be stuck with a $3 million exemption for the foreseeable future.

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Original date of post: 03/03/26

Update on 3/25/26

Paul Premack is an estate planning attorney licensed in Washington and Texas. He is certified as an Elder Law Attorney by the National Elder Law Foundation.