Estate Taxes 101

By Jenny Ling, Esq.

You might be surprised to learn that you are at risk of paying estate taxes when you die.  Afterall, you probably aren’t a member of the Walton family and don’t own a family farm.  Our vision of who owes estate taxes is very influenced by the federal estate tax conversation.  But Washington State has an estate tax as well.  In fact, Washington has one of the lowest thresholds in the entire country.

In Washington State, estates valued at more than $2.193 million dollars are taxed at a rate of 10-20%.  I know that $2.193 million sounds like a lot but use this worksheet to see what your estate is worth.  Your estate will include everything you own – your house, your cars, any retirement accounts, savings, even your life insurance.  That can add up quickly.  If you are married, any assets that you pass to your surviving spouse are exempt from state estate tax regardless of value.  However, estate taxes on the whole amount would be due when that spouse dies.

Federal estate taxes have a much higher exemption – currently $12.06 million.  That amount is set to expire at the end of 2025 and revert back to between $5.5 and 6 million (the amount is subject to inflation). If you or your spouse are non-U.S. citizens, there are additional considerations and the $11.58 million exemption may not apply.

What happens if you don’t make a plan?  Your estate could receive a hefty tax bill soon after your death.  Your family may have to liquidate your assets, like selling the family home, in order to pay the bill.

A well-crafted estate plan can help you use the exemption for both spouses to eliminate and limit the amount of taxes your estate would need to pay, and possibly prevent the liquidation of assets like the family home to pay the tax.

If your estate is worth more than $2.193 million, it is essential that you make a plan to preserve the $2.193 million exemption for the first spouse to decease that would otherwise be lost when the first spouse passes away.  Contact Us  to Make a Plan that will ensure that you can pass on all you’ve worked for.