Overview of Washington Estate Tax Laws
How the Washington Estate Tax Can Affect an Estate
Washington is one of just a handful of states that collects an estate tax. The estates of Washington residents—as well as nonresidents who own real or tangible personal property located here—are subject to taxation on values over a certain threshold, called an exemption.
This has been the case since the November 1981 election when voters repealed the then-existing inheritance tax and effectively replaced it with an estate tax.
The Washington Estate Tax Exemption
An estate is subject to the Washington tax when a decedent dies owning a gross estate that exceeds a value of $2.193 million as of 2019.
A law signed by Governor Jay Islee in June 2013 adjusted the former estate tax exemption of $2 million for inflation on an annual basis beginning in 2014.
The base value of the exemption before inflation adjustments was just $2 million as of Oct. 22, 2016. The exemption can be expected to increase incrementally from year to year to keep pace with the economy.
Estates That Must File a Return
It used to be that some Washington estates had to file an estate tax return even if they didn't owe the tax because they were valued below the exemption threshold, but that law has been repealed. The exemption amount and the filing requirement threshold have been the same since Oct. 23, 2016.
Estates that must file a federal estate tax return, Form 706, must include a copy of that return with their state returns.
How the Tax is Calculated
The estate tax can be calculated using Table W, published by the Washington State Department of Revenue.
A "Washington taxable estate" is the same as the federal taxable estate before deducting state estate, legacy, or succession taxes, and less the applicable estate tax exemption of $2.193 million in 2019. It also provides for the deduction of any value of any real or tangible personal property that qualifies for a farm deduction.
All property owned by the decedent must be included, even property that's physically located in another state. The amount of the estate tax due is then apportioned between Washington and out-of-state property.
The Washington estate tax rate is progressive. It maxes out at 20% for estates valued at $9 million or more as of 2019. The lowest rate for estates that inch just over the exemption amount is 10%.
Transfers to Surviving Spouses
Outright transfers to surviving spouses are exempt from Washington's estate tax.
Married couples who have used AB Trust planning to reduce their federal estate tax bill might find that a Washington estate tax is due on the B Trust as a result of the gap between the Washington exemption and the federal exemption. The federal estate tax exemption is $11.4 million as of 2019, so the gap is pretty significant.
Nonetheless, a married decedent's estate can make a Washington-only election to treat a trust as a "qualified terminable interest property" or "QTIP" trust if the surviving spouse is the sole beneficiary.
Married Washington residents can defer payment of both Washington and federal death taxes until after the death of the surviving spouse by using an ABC trust when there's a gap between the Washington estate tax exemption and the federal exemption, and when a state-only QTIP election is allowed.
Washington law recognizes QTIP trusts as of 2019.
When the Return and Payment Are Due
The Washington State estate tax return must be filed and any estate tax that's due must be paid within nine months of the decedent's date of death. Late payment of any Washington State estate tax made after the initial due date will accrue interest, although there's no late payment penalty in addition to interest.
Extension requests, Washington State estate tax returns, and payments are all mailed to the Washington State Department of Revenue, P.O. Box 47488, Olympia, Washington 98504-7488.
Courier service deliveries should be sent to the Washington State Department of Revenue Estate Tax, Attn: Treasury Management, 6500 Linderson Way SW, Suite 227, Tumwater, Washington 98501-6561.
Where the Revenue Goes
Estate tax receipts are distributed to the Education Legacy Trust Fund. The Fund's purpose is to reduce class sizes, train teachers, provide learning assistance programs, and to provide financial aid for higher education.