If you live in Washington, then you live in one of a handful of states that still collect a state estate tax. The estates of Washington residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Washington, are subject to a state estate tax under the following guidelines.
NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
When is an estate subject to the Washington estate tax?
For deaths that occurred on or after May 17, 2005 and on or before December 31, 2005, an estate may be subject to the Washington estate tax if the decedent owned property located in Washington State and the gross estate, or taxable estate plus any taxable gifts, exceeds $1,500,000.
For deaths that occurred on or after January 1, 2006, an estate may be subject to the Washington estate tax if the decedent owned property located in Washington State and the gross estate, or taxable estate plus any taxable gifts, exceeds $2,000,000.
NOTE: A new law signed into law by Governor Jay Islee in June 2013 will index the $2,000,000 exemption for inflation on an annual basis beginning on January 1, 2014.
In general, if an estate is required to file a federal estate return return, (IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return), then it will be required to file a Washington State Estate Tax Return. However, if the estate is over the applicable Washington State filing threshold as stated above but is not required to file IRS Form 706, then the estate will still be required to file a Washington State Estate Tax Return.
What Washington estate tax forms must be filed?
When the estate is filing a federal estate tax return (IRS Form 706), the estate must also file a Washington State Estate and Transfer Tax Return For deaths occurring May 17, 2005 and after when filing Federal Form 706.
When the estate is not filing a federal estate tax return (IRS Form 706), the estate must file a Washington State Estate and Transfer Tax Return For deaths occurring January 1, 2009 and after when not filing Federal Form 706.
Are transfers to a surviving spouse taxable?
Outright transfers to a surviving spouse are not taxable.
For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Washington estate tax may be due on the B Trust as a result of a gap between the Washington exemption and the federal exemption. In 2013, that gap is $3,250,000. Nonetheless, a married decedent's estate can make a Washington-only election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP Trust" for short) for purposes of calculating the Washington estate tax. Thus, since there is 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 using ABC Trust planning.
When are the Washington estate tax return and tax payment due?
The applicable Washington State Estate Tax Return must be filed, and any estate tax due must be paid, within nine months of the decedent's date of death.
When applying for the automatic six-month extension to file the federal estate tax return (IRS Form 706), a copy of IRS Form 4768, Application for Extension of Time to File Estate Tax Return, may be filed with Washington State which includes estimated Washington tax, if any. If the estate is not required to file IRS Form 706, then it can submit an Application for Extension of Time to File a Washington State Estate and Transfer Tax Return.
Payment of any Washington State estate tax after the initial due date (nine months of the date of death) will accrue interest.
Where are the Washington estate tax return filed and tax payment made?
Extension requests, Washington State estate tax returns and payments are all mailed to the following address:
Washington State Department of Revenue
P.O. Box 47488
Olympia, WA 98504-7488
How is the Washington estate tax calculated and what is the estate tax rate?
The Washington estate 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 the applicable estate tax exemption ($2,000,000 for deaths that occur on or after January 1, 2006) 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% for estates valued at least $9,000,000.
NOTE: A new law signed into law by Governor Jay Islee in June 2013 will increase the estate tax rates in the top four brackets as follows as of January 1, 2014:
- Washington taxable estates of at least $4,000,000 but less than $6,000,000: rate increases from 17% to 18%
- Washington taxable estates of at least $6,000,000 but less than $7,000,000: rate increases from 18% to 19%
- Washington taxable estates of at least $7,000,000 but less than $9,000,000: rate increases from 18.5% to 19.5%
- Washington taxable estates of at least $9,000,000: rate increases from 19% to 20%
Where can I find additional information about Washington estate taxes?
For more information about Washington estate taxes, refer to the Washington State's Department of Revenue website.
You can also e-mail your Washington estate tax questions or call (360) 570-3265 to speak with an estate tax specialist.
What Are Washington State estate taxes used for?
Estate tax receipts are distributed to the Education Legacy Trust Fund.