Overview of Washington Estate Tax Laws
Understand How Washington Estate Taxes Can Affect an Estate
If you live in Washington State, you live in one of a handful of states that still collect an estate tax. The estates of Washington residents—as well as the estates of nonresidents who own real estate and/or tangible personal property located there—are subject to a state estate tax under the following guidelines.
When an Estate is Subject to the Washington Estate Tax
An estate is subject to the Washington estate tax if the decedent died owning property located in the state and his gross estate exceeds a value of $2,129,000 as of 2017.
In June 2013, a law signed by Governor Jay Islee caused the former estate tax exemption of $2 million to be adjusted for inflation on an annual basis beginning in 2014. This means that the exemption can be expected to increase incrementally from year to year to keep pace with the economy.
When a Washington Estate Has to File a State Estate Tax Return
It used to be that some Washington estates had to file an estate tax return even if they did not owe an estate tax because their values fell below the exemption amount. The value threshold for having to file a return was just $2 million as of October 22, 2016. That law has since been repealed. The exclusion amount and the filing requirement threshold have been the same—currently $2,129,000—since October 23, 2016.
How the Washington Estate Tax is Calculated
The Washington estate tax is calculated using the value of the taxable estate and Table W. The "Washington taxable estate" means the federal taxable estate before deducting state estate, inheritance, legacy, or succession taxes, less the applicable estate tax exemption of $2.129 million and the amount of any real or tangible personal property that qualifies for a farm deduction.
The tax rate is a progressive one that maxes out at 20 percent for estates valued at $9 million or more as of 2017. The lowest rate for estates that inch just over the exemption amount is 10 percent as of 2017.
Are Transfers to a Surviving Spouse Taxable?
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 may find that a Washington estate tax is due on the B Trust as a result of a gap between the Washington exemption and the federal exemption. The federal estate tax exemption is $5.49 million as of 2017, so the gap comes out to a very significant $3,361,000.
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. When there's a gap between the Washington estate tax exemption and the federal exemption and a state-only QTIP election is allowed, 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 the Washington Estate Tax Return and Tax 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. Payment of any Washington State estate tax after the initial due date will accrue interest.
Extension requests, Washington State estate tax returns and payments are all mailed to the Washington State Department of Revenue at P.O. Box 47488, Olympia, Washington 98504-7488.
Where to Find Additional Information About Washington Estate Taxes
What Washington State Estate Taxes are Used For
Estate tax receipts are distributed to the Education Legacy Trust Fund.