You have the right to transfer property upon your death, but if your estate is over a certain value, the government imposes a tax on that right. This is known as the estate tax, and it is widely misunderstood.
Both the federal government and the State of Washington impose estate taxes, but there are key differences in how they work, and whether any one particular estate will be subject to them.
Before we explore the concept further, we must note that payment for these taxes comes from the estate. If the taxes apply, the executor of the will or the personal representative of the estate pays the tax from out of the estate, not out of their own pocket.
Federal threshold
Both federal and state estate taxes have exclusion amounts. You can think of these as thresholds: If the dollar value of your estate is over a certain limit, the tax applies; if the value is under that limit, the tax does not apply.
Both the federal and the Washington exclusion amounts have changed many times over the years, and both are set quite high. The federal estate tax exclusion is $136,100,000 for the estates of people who die in 2024. This high threshold means the federal estate tax is a matter of concern only to a small number of families.
Washington threshold
The threshold for the Washington estate tax is quite a bit lower. For estates of a person who dies in 2024, the Washington state tax kicks in above $2,193,000 after all deductions.
After that point, the remaining value is taxed according to a set of progressively higher tax brackets, ranging from 10% to 20%.
Your estate plan and estate taxes
When you plan your estate, it’s wise to keep estate taxes in mind. If you think the total value of your estate could be over the exclusion amounts, start looking into deductions and other ways to reduce your estate’s tax liability.