Starting Jan 1, 2025, a change has been adopted by the Washington Department of Revenue regarding filing requirements for the Estate and Transfer tax return (Estate Tax).
New rule excluding personal residence:
The new rule issued by the WA Dept. of Revenue states that for deaths on or after 1/1/25, an exclusion is allowed for the value of the primary residence at the death of the first spouse, in determining if the estate is over the filing requirement threshold of $2,193,000.
The exclusion is only for determining if the return needs to be filed; the residence is not excluded when filing the return.
Not sure what WA estate tax is or if your estate could have a future filing requirement? Read on!
Filing threshold:
An estate tax return is required to be filed when a decedent’s separate property plus 50% of their community property assets total $2,193,000 or greater at the date of death.
Marital deduction:
A filing is required any time the gross estate meets the filing threshold, even if no tax is due. When a decedent is married, leaving a surviving spouse, typically no estate tax is due, even though the decedent’s property value is over the $2,193,000 threshold.
This happens because the estate tax return allows a 100% deduction of the value of any asset that will be transferred to the surviving spouse’s ownership.
Federal Estate Tax:
The current estate tax exclusion is almost $14,000,000. There is much uncertainty around the exclusion for future years. This exclusion is expected to drop to approximately $7,000,000 at January 1, 2026. It is often advisable to file a federal estate tax return, even if not required, to elect portability of the unused exclusion. We would be happy to discuss this decision with you.
Gifting:
The value of the assets owned by a surviving spouse (or single person), over the $2,193,000 threshold are subject to WA estate tax. If you think your assets could be over that value, and want to reduce your future taxable estate, you should consider gifting. There is no gift tax in Washington state. Any assets gifted during your lifetime would not be included in your estate at your death, and not subject to WA estate tax. There are many income and estate tax ramifications to gifting.
Plan Ahead with Expert Guidance
Estate tax laws are constantly evolving, and understanding their impact on your financial future is crucial. Whether you need help determining your filing requirements, planning for potential tax changes, or exploring gifting strategies, our experienced team at Shannon & Associates is here to guide you.
Contact us today to discuss your estate planning needs and ensure you’re making the best decisions for your financial legacy. Let’s plan for your future together!
