Washington Ratchets Up Its Estate Tax Effective July 1 – Estates Over The Federal Exemption Amount Will Have An Effective Rate Of 61%.

On Tuesday, May 20, Governor Ferguson signed into law a major increase in the Washington estate tax, applying to deaths after June 30, 2025. The new top rate is now 35% on estates over $9 million, which is an increase of 15% from the prior top rate of 20%. The new law also increases the exemption amount to $3 million from $2,193,000 and corrects the decade-long failure to index the estate tax exemption amount for inflation. Thus, estates subject to both state and federal estate taxation now have a combined maximum effective estate tax rate of 61%.

Smaller estates are also subject to higher rates.  Estates with values between $3 million to $4 million will be subject to a tax rate of 19%, which is a 3% increase over prior law. For a taxable estate worth $4,000,000, the Washington estate tax in June 2025 would be $550,000, and in July 2025 will increase to $610,000.

The updated law also provides some limited, additional relief for a Qualified Family-Owned Business Interest (“QFOBI”) if the property passes to a “qualified heir” or “qualified nonfamilial heir.” For farm businesses, transfers to employees of the farm business can enable the estate to qualify for the QFOBI deduction.

Given the large tax increases imposed by SB 5813, Washington residents with significant assets should carefully review their existing estate planning strategies, including whether to relocate their domicile to a state with more favorable estate tax laws. Non-residents owning property in Washington should consider strategies to reduce their situs in the state of Washington. The PRK Livengood estate planning team is available for consultation.

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