Changes to the Washington Estate & Transfer Tax Starting July 1, 2025

Starting on July 1, 2025, the State of Washington is changing how it taxes estates upon a decedent’s death. For many individuals, this change may have a significant impact on their estate plan and intended beneficiaries, particularly for individuals who want to maximize the amount of their estate passing to children, family members, or other non-charitable beneficiaries.

Washington is one of only a handful of states that impose a separate state-level estate tax, in addition to the federal estate tax. Currently, the Washington Estate Tax applies to estates of decedents who are either (1) Washington residents at the time of their death, or (2) non-residents who own real estate or tangible personal property situated in Washington. Since 2018, Washington’s Estate Transfer Tax has remained relatively unchanged. The current law imposes a marginal tax rate ranging between 10% and 20% on the value of estates exceeding the “applicable exclusion amount” (think “credit”) of $2,193,000. This means that for each dollar of a decedent’s estate that exceeds $2,193,000, the estate is taxed between 10% and 20%, depending on the total value of the estate and deductions available to the estate.

Starting on July 1st of this year, the applicable exclusion amount will be increased to $3,000,000 per person and will be adjusted for inflation each year starting on January 1, 2026. However, the marginal tax rates applicable to estates in Washington are being expanded and increased. The following table summarizes the old and new tax rates applicable to amounts exceeding the available applicable exclusion amount:

 

Portion of Estate Exceeding

Applicable Exclusion Amount

Before July 1, 2025

Marginal Tax Rate

After July 1, 2025

Marginal Tax Rate

$0 to $1,000,000 10% 10%
$1,000,000 to $2,000,000 14% 15%
$2,000,000 to $3,000,000 15% 17%
$3,000,000 to $4,000,000 16% 19%
$4,000,000 to $6,000,000 18% 23%
$6,000,000 to $7,000,000 19% 26%
$7,000,000 to $9,000,000 19.5% 30%
$9,000,000 and up 20% 35%

 

Importantly, for married couples who want to leave most of their estate to their spouse, an available marital deduction continues to permit the spouses to defer estate taxation for any amount of their estate passing to a surviving spouse. However, married couples should also consider that such amounts received from the deceased spouse would typically be included in the survivor’s estate at the survivor’s death, and potentially taxed. Additionally, the applicable exclusion amount available to the first-spouse-to-die is often wasted and unavailable to shield the transfer of assets to children (or other family members) at the surviving spouse’s death because the transfer was already covered by the marital deduction. This can leave the surviving spouse with only a single applicable exclusion amount to shield the joint estate from taxation when it is transferred to children at the survivor’s death. With advance planning incorporated into a Will or Living Trust, the spouses could structure their estate plan in a flexible manner that simultaneously permits the surviving spouse the lifetime benefit of the assets received from the deceased spouse’s estate, while also ensuring that the deceased spouse’s applicable exclusion amount is available to shield those assets from estate taxation when they are transferred to children or other beneficiaries, effectively permitting spouses to jointly transfer up to $6,000,000 of assets to children or other beneficiaries, instead of just $3,000,000.

If you have any estate or tax planning questions, please contact one of our knowledgeable attorneys or call for more information at 206-624-6271.

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