Effective May 17, 2005, the Washington legislature enacted a free standing state estate tax on the estates of residents and nonresidents who own real property or tangible personal property located in Washington. For decedents dying on or after January 1, 2006, the following rules apply:
- A Washington State Estate and Transfer Tax Return must be filed if the decedent's gross estate exceeds $2,000,000.
- If an estate is required to file a federal estate tax return, IRS Form 706, then it's also required to file a Washington estate tax return even if no tax is due.
- A “Washington-only” QTIP election and corresponding marital deduction can be made on the Washington estate tax return. As a result, a QTIP election may be made on the Washington return that's different from the election made on the federal return and a QTIP election may also be made on the Washington return when no federal return is required. What this means is that if the estate is passing to a surviving spouse through an ABC Trust scheme, then the payment of both Washington and federal estate taxes can be deferred until after the death of the surviving spouse.
- The Washington return is due nine months after the decedent's date of death.
- An extension of time to file the return may be requested by sending a copy of IRS Form 4768 and paying the estimated Washington tax, if any.
- The tax is calculated using the Washington taxable estate and Table W. The “Washington taxable estate” means the federal taxable estate before deducting state estate, inheritance, legacy, or succession taxes less $2,000,000 and the amount of real or tangible personal property that qualifies for a farm deduction.
- The tax rate is a progressive one that ranges from 10% for taxable estates valued up to $1,000,000 and maxes out at 19%.
This information is courtesy of the Washington State Department of Revenue.
The bottom line - if you're a Washington resident and your estate is passing to someone other than your spouse and the value is $2,000,000 or more, or if you're a nonresident who owns real estate and/or tangible personal property located in Washington and your estate is valued at $2,000,000 or more, then your estate may owe a Washington estate tax. And with that I've wrapped up the summary of current state estate tax laws.
- Understanding Death, Estate and Inheritance Taxes
- State Estate Tax Chart
- Understanding the State Estate Tax Exemption Trap
- What is an ABC Trust?
- When is a Federal Estate Tax Return Required to Be Filed?
- How to Calculate Your Federal Estate Tax Liability
- How to Reduce or Even Eliminate Your Estate Tax Bill