Estate Tax Planning Strategies for Washington Residents

For Washington residents, estate planning is about more than distributing assets; it’s about navigating one of the most aggressive state estate tax systems in the country. With a low exemption threshold and tax rates that can reach 20%, Washington’s estate tax can impact more families than many realize. And when combined with potential federal estate tax exposure, the total cost to your estate could be substantial.

A comprehensive financial plan should be tailored to your needs, including strategies designed to help minimize estate taxes, support long-term goals and preserve wealth for future generations.

If you live in Washington and have a sizable estate, here’s what to know – and how thoughtful planning can make a difference.

WASHINGTON’S ESTATE TAX: HOW IT WORKS

Washington is one of the few states that imposes its own estate tax, and it starts at a relatively low threshold. As of July 1, 2025, estates valued over $3 million are subject to the state’s estate tax, a figure well below the federal exemption. Because this threshold hasn’t kept pace with inflation, more Washington families are finding themselves affected, even if they don’t consider their estates particularly large.

The tax is calculated on a progressive scale, with rates ranging from 10% to 35%, depending on the overall value of the estate. This tax is paid by the estate before assets are passed on to heirs.

While Washington does not have an inheritance tax or a state-level gift tax, certain lifetime transfers can still be factored into your estate’s value. That makes it important to understand how various elements of your financial plan – such as gifting strategies, trusts and beneficiary designations – can affect your overall estate tax exposure.

A financial advisor and estate attorney who understand the intricacies of Washington’s estate tax laws can help you explore options and use strategies designed to reduce the impact on your legacy.

FEDERAL ESTATE TAX: WHAT’S CHANGING

As of 2025, the federal estate tax exemption is $13.99 million per individual (increasing to $15 million per individual as of January 1, 2026), and married couples are able to combine their exemption amounts. Estates that exceed these limits may be subject to a 40% federal estate tax on the amount above the exemption.

If your estate is projected to exceed the exemption, now is a critical time to plan. There are planning strategies that may allow you to take advantage of today’s limits. Early action can help reduce future tax exposure and provide more flexibility in how you transfer wealth to the next generation.

STRATEGIES TO CONSIDER

There’s no universal approach to estate planning. The right strategy depends on your financial goals, family dynamics and the size and structure of your estate. That said, there are several tools that can help reduce potential estate tax exposure – both at the state and federal levels.

LIFETIME GIFTING

One way to reduce the size of your taxable estate is by transferring assets during your lifetime. In 2025, you can give up to $19,000 per recipient each year without affecting your federal lifetime exemption.

While this strategy may help reduce your federal estate tax liability, it’s important to note that Washington doesn’t exclude lifetime gifts from your estate when calculating state estate taxes. In other words, even if you give assets away during your lifetime, their value could still be counted when determining your estate’s Washington tax bill.

Because of this, the effectiveness of lifetime gifting as a tax strategy depends on how – and when – it’s done.

USE OF TRUSTS

Trusts can be powerful tools in estate planning, offering greater control over the distribution of your assets. Here are a few trust types commonly used in high-net-worth estate planning:

• Irrevocable Life Insurance Trusts: Used to create a resource outside of the decedent's taxable estate that may be used to pay estate taxes
• Spousal Lifetime Access Trusts: Allow one spouse to benefit from the trust during their lifetime while keeping the assets outside both spouses’ estates
• Grantor Retained Annuity Trusts: May enable you to transfer appreciating assets to beneficiaries at a reduced gift tax cost

Each type of trust serves a different purpose and comes with specific rules and trade-offs. The key is ensuring that the trust is structured and implemented correctly, aligned with both your long-term goals and current estate tax laws.

PLANNING FOR MARRIED COUPLES

Married couples face unique considerations when it comes to estate tax planning, especially in Washington, where state and federal rules don’t always align.

At the federal level, estate tax law includes a portability provision, which allows a surviving spouse to use any unused portion of their partner’s exemption. This can effectively double the exemption amount for married couples, helping reduce or even eliminate federal estate tax liability.

Washington state law, however, does not offer portability. If one spouse doesn’t fully use their state-level exemption before death, that exemption is lost. Without proper planning, this can lead to a higher estate tax bill for the surviving spouse, and a reduced amount passed on to beneficiaries.

One commonly used strategy is the credit shelter trust (also known as a bypass trust). This type of trust helps preserve both spouses’ Washington estate tax exemptions, minimizing the overall tax impact and allowing more assets to be transferred to heirs in a tax-efficient way.

MULTIGENERATIONAL PLANNING

If part of your estate plan includes supporting children, grandchildren or even future generations, there are strategies that can help you transfer wealth in a tax-efficient and intentional way.

Tools to consider include:

• Dynasty trusts: Can preserve assets across multiple generations while offering protection from estate taxes, creditors or divorce settlements
• Generation-skipping transfer strategies: May help reduce or avoid the additional federal tax that applies when assets skip a generation
• Family limited partnerships: Allow you to consolidate and manage family wealth – such as business interests or real estate – while maintaining some control and potentially reducing estate tax exposure

These strategies can be particularly valuable for families with significant real estate, a closely held business or a desire to establish a lasting financial legacy.

CHARITABLE GIVING

If supporting a charitable organization speaks to you, philanthropy can play a meaningful role in your estate plan, allowing you to support the causes you care about while also reducing estate and income tax liabilities.

Several giving vehicles offer flexibility and potential tax advantages:

• Donor-advised funds: Make a charitable contribution, receive an immediate tax deduction and recommend grants to nonprofits over time
• Charitable remainder trusts: Provide an income stream to you or your beneficiaries for a set period, with the remaining assets going to a nonprofit of your choice
• Private foundations: Offer long-term charitable giving opportunities with greater control, the potential for family involvement and a more formal philanthropic structure

When integrated into your estate plan, charitable giving strategies can reflect your values, strengthen your legacy and offer benefits to both your family and the communities or causes you care most about.

START PLANNING TODAY

With one of the lowest state estate tax exemptions in the country, and potential changes ahead at the federal level, estate planning is more important than ever for Washington residents.

The right strategy can help you minimize tax exposure, protect your loved ones and ensure your assets are passed on according to your wishes.

At Edelman Financial Engines, we help individuals and families navigate these complex decisions with clarity and confidence. Whether you're preparing for a potential shift in tax law or creating a legacy plan for future generations, our advisors are here to help support your goals.