Frequently Asked Questions
What is the Washington Estate Tax?
The State of Washington taxes estates that are greater than $2,193,000 per person. This $2,193,000 amount is known as the estate tax exclusion amount. The tax is imposed on everything an individual owns at the time of their death. The state imposes a graduated tax rate starting at 10% and reaching 20%. The state publishes relevant tax tables here: https://dor.wa.gov/taxes-rates/other-taxes/estate-tax-tables
What is the Federal Estate Tax?
The federal government imposes a 40% tax on estates that are greater than $13.61 million per person. This exclusion amount is reduced by lifetime gifts that are not covered by an individual’s annual exclusion amount, currently $18,000. While the federal exclusion amount is scheduled to be cut in half in 2026, a married couple is currently able to pass over $26 million to the next generations free of federal estate and gift taxes.
Does Washington have a Gift Tax?
No, Washington does not have a gift tax. The lack of gift tax allows clients to make substantial lifetime gifts to their families without paying any taxes to the state of Washington. As long as the gift is completed before death, the gifted assets will not be included in the deceased’s taxable estate for Washington purposes. For federal purposes, it is important to remember that substantial gifts during life reduce the available exclusion amount at death. Which such a high federal exclusion amount, however, many individuals will never need to worry about federal gift or estate taxes.
If I give away more than the Annual Exclusion Amount ($18,000 for 2024) per year, do I owe gift taxes?
No. You would only owe gift taxes if you give away more than $13.61 million over the course of your life. If you give away more than $18,000 per year to any one individual, you will need to file a gift tax return. Until you give away more than your federal exclusion amount of $13.61 million, however, the tax return simply allows the IRS to keep score and track how much you have gifted.
Do I need a Revocable Living Trust?
It depends. Estate planning attorneys use revocable living trusts (RLTs) to avoid probate. In Washington, probate is not particularly expensive or onerous. Therefore, cost savings and ease of administration alone do not normally justify the use of an RLT. An RLT is the proper estate planning tool in two primary scenarios.
First, if a client owns out-of-state property, placing the property in an RLT will avoid probate in the other state. While probate in Washington is simple, probate in other states can be expensive and time consuming. Additionally, there is no need to go through probate in multiple states if the property is held in an RLT.
Second, if a client does not want their will to be public record, an RLT may be the right estate planning tool. When probate is started, the will is filed with the court. After filing, the will becomes public record. Some clients do not want their last wishes to be public record. Public figures, clients with special needs children, clients with substantial wealth, and clients with a strong sense if privacyshould all consider using an RLT to avoid their wills becoming public record.
What should I do about my out-of-state property?
Your out-of-state property should be held in a revocable living trust (RLT), a limited liability company (LLC), or another corporate entity. If the out-of-state real property is held in an RLT, it will be treated as out-of-state property for estate tax purposes and could result in a lower Washington estate tax burden. The RLT, however, offers no liability protection. If the out-of-state property is held in an LLC or other corporate structure, the client gains liability protection, but the out-of-state property is converted to an intangible financial asset. Intangible financial assets are taxed, for estate tax purposes, in a person’s state of domicile (where they live). For Washington residents, placing an out-of-state asset in an LLC could increase the individual’s estate tax burden. Deciding between an RLT or an LLC requires an analysis of the tradeoffs between liability protection and estate tax savings.
