Three Big Changes to Washington Estate Tax Laws as of July 1, 2025
On July 1, 2025, three big changes to Washington’s estate tax law will go into effect. In its 2025 session, the Washington legislature passed a bill that provided for increases to the individual exclusion amount, addressed an issue that caused the exclusion amount to be frozen at $2.193 million for several years, and substantially increased the rates paid by estates subject to the tax.
- The exclusion amount goes up. Effective July 1, 2025, the exclusion amount will increase to $3 million. This means that each Washingtonian will be able to pass on $3 million in assets to family members or other individuals free of estate tax. Any amount above $3 million in a Washington taxable estate will be subject to estate tax.
- The exclusion amount will increase with the cost of living. Washington’s prior estate tax law increased to the state’s estate tax rate based on a federal consumer price index that was eliminated in 2018, resulting in the estate tax exclusion amount stalling at $2.193 million. This glitch in the prior estate tax law that froze the exclusion amount has been addressed, and the exclusion amount will now increase each year on January 1, based on increases to the federal consumer price index for the Seattle metropolitan area.
- Estate tax rates increase. Washington estate tax rates are increasing on July 1, 2025, with a new top rate of 35 percent. Washington’s estate tax is imposed on the value of an estate above an individual exclusion amount set by state law.
What is a Washington taxable estate? It is calculated in the same manner as an estate would be for federal estate tax purposes – with a few Washington-specific exceptions. The value of a Washington taxable estate includes the date of death values for real property, retirement accounts, investments, cash accounts, business interests, life insurance, and personal property – in other words, pretty much everything – less deductions for items like charitable gifts on death, funeral expenses, and costs of estate administration. Washington also has deductions for farms and family businesses that meet certain conditions. In addition, Washington provides a formula to reduce the value of any real property located outside Washington when calculating the taxable estate.
The change in Washington’s estate tax means that it may be time to evaluate whether a change to your estate plan is warranted. Because the exclusion amount has gone up, some people with estates between $2 million and $3 million who would have had a taxable estate under the old law will no longer have a Washington taxable estate. For people with estates greater than $3 million, however, the amount of tax paid by their estates is going to go up.
To learn more about Washington estate tax, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.
