Understanding Estate Tax: A Brief Overview

When planning for the future, one critical consideration is how your estate will be treated after your passing. In the United States, there is a federal estate tax, and some states including Washington also impose their own estate taxes. This article provides a high-level overview of both federal and Washington State estate tax rules to help you better understand the basics.

What Is an Estate Tax?

An estate tax is a tax on the transfer of property upon death. It is calculated based on the fair market value of the decedent’s assets at the time of death, not the original purchase price. Assets subject to estate tax may include:

• Cash
• Real estate
• Investments
• Business interests
• Personal property
• Other tangible or intangible assets

Federal Estate Tax in 2025

As of 2025, the federal estate tax exemption is $13.9 million per individual. For married couples, this exemption can effectively double if structured properly with the use of portability.

If your estate's total value is below the applicable exemption amount, it will not be subject to federal estate tax. However, if your estate exceeds this amount, the portion above the exemption is subject to a progressive tax rate of up to 40%.

Important Note: Under the One Big Beautiful Bill Act, the exemption per individual will increase to $15 million in 2026 and will index for inflation in the future.

Washington State Estate Tax

In addition to the federal tax, Washington State imposes its own estate tax, which means estates may be subject to taxation at both the federal and state levels.

Recent changes to Washington’s estate tax laws include:

• Increased Exclusion Amount: The state estate tax exclusion has been raised from $2.193 million to $3 million. This amount will now be adjusted annually for inflation.
• Higher Tax Rates: The top marginal estate tax rate has increased from 20% to 35% for estates that exceed the $3 million exclusion amount.
• Expanded Deduction for Family-Owned Businesses: The deduction for qualified family-owned business interests has been increased to $3 million, and this, too, will be indexed for inflation going forward.

Conclusion

While many estates will fall below federal and state exemption thresholds and owe no tax, individuals and families with significant assets should consider proactive estate planning. A well-crafted estate plan can help minimize tax exposure, ensure your wishes are fulfilled, and preserve wealth for future generations.

Next Steps

If you have questions about estate taxes or would like to talk about strategies to mitigate estate taxes, please contact our team. We can work alongside your legal and tax professionals to ensure your estate is structured to align with your goals.