Washington State Estate Planning 2026: $3M Exemption, No Portability, and the July 1 Rate Rollback

Washington has one of the most consequential state estate taxes in the country — and one of the most misunderstood. The exemption is $3,000,000 per person starting July 1, 2026 (currently $3,076,000 through June 30), more than $12 million below the federal $15M threshold. WA has no portability, so a married couple without a credit shelter trust loses one spouse's full $3M WA exemption at the first death. Unlike most states with an estate tax, Washington has no state gift tax — making annual gifting a uniquely powerful tool. And the WA estate tax is about to get significantly better: effective July 1, 2026, the top rate drops from 35% to 20%, reversing a 2025 increase. Here is what every HNW Washington family needs to know.

The July 1 rate change — what it means right now

Washington's current top estate tax rate is 35% — the result of SB 5813, which took effect July 1, 2025. Governor Ferguson signed SB 6347 into law, rolling back these rates effective July 1, 2026. After that date, the top rate returns to 20%.

This creates an unusual planning consideration: for large estates where a death occurs between now and June 30, 2026, the WA estate tax is substantially higher than it will be for deaths on or after July 1. The difference for a $10M estate above the exemption is significant:

Approximate figures using graduated rate schedules. The actual liability is computed on Form REV 85 0050 using Table W. Consult dor.wa.gov for current Table W before relying on any estimate.

Washington estate tax rate schedule (July 1, 2026 onward)

After July 1, 2026, the WA estate tax applies graduated rates to the Washington taxable estate — the gross estate minus the $3M exemption and any applicable deductions. The graduated rate schedule restored by SB 6347:

Verify the current Table W at dor.wa.gov/taxes-rates/other-taxes/estate-tax-tables before filing. The WA DOR publishes the official computation worksheet annually.

Washington vs. federal: six critical differences

The portability gap — why WA married couples must use credit shelter trusts

The federal estate tax allows portability: at the first spouse's death, the surviving spouse can elect to use the deceased spouse's unused exclusion amount (DSUE). A couple with a combined estate under $30M can use combined portability to protect the full $30M from federal tax.

Washington does not allow portability. If a WA married couple leaves everything to the surviving spouse, the surviving spouse has only their own $3M WA exemption at death. The first spouse's $3M WA exemption is gone — wasted — even if they had no WA taxable estate at the first death because of the unlimited marital deduction.

For a married couple with a $9M combined estate, the math is stark:

Correcting that table for clarity — a $9M estate split evenly ($4.5M each):

The credit shelter trust (also called a bypass trust or "B trust") transfers assets equal to the first spouse's WA exemption into an irrevocable trust at death. The surviving spouse can receive income and principal under a HEMS standard, but the trust is not part of the surviving spouse's WA taxable estate. For couples between $6M and $15M (both WA-taxable, but federal-exempt under OBBBA), this is the most critical planning tool.

Washington's no-gift-tax advantage

Washington has no state gift tax.³ This is unusual — most states with an estate tax (Massachusetts, Oregon, Minnesota, Maryland) also impose a gift tax or add gifts back to the taxable estate at death. WA does neither.

This creates a unique planning opportunity: every dollar gifted during life permanently escapes the WA estate tax — with no WA lookback period, no WA gift filing, and no WA gift tax. The only gift tax considerations are federal:

• Annual exclusion: $19,000 per donor per recipient in 2026 ($38,000 per married couple). Gifts up to this amount per recipient require no Form 709, reduce neither spouse's WA gross estate, and carry no WA consequence at all.⁴
• 529 superfunding: $95,000 per beneficiary ($190,000 per couple) using the 5-year election — removed from the WA estate immediately, grows tax-free. See the grandchildren planning guide.
• Direct tuition and medical payments (IRC §2503(e)): Unlimited — payments made directly to an educational institution or medical provider are not gifts at all. A grandparent paying $80,000/year in tuition removes $80,000 from the WA estate with zero tax consequence of any kind.
• Taxable gifts above the annual exclusion: Reduce the federal $15M lifetime exemption, but the gift itself is gone from the WA estate. For families between $3M and $15M net worth (above WA threshold, below federal), taxable gifts during life incur no current federal gift tax (the lifetime exemption absorbs them) and permanently reduce the WA taxable estate. For families above $15M, the federal gift tax cost must be weighed against the WA estate tax savings — but WA's 20% top rate is still lower than the 40% federal rate, making gifting strategies net-positive in almost all scenarios.

Community property: Washington's hidden estate planning advantage

Washington is one of nine community property (CP) states. Under IRC §1014(b)(6), when a CP spouse dies, 100% of the couple's community property receives a step-up in basis to fair market value — not just the decedent's 50% share.⁵

In a common law state (say, the surviving spouse's brother in Texas — wait, Texas is also CP — or in, say, Illinois), when one spouse dies, only the deceased spouse's 50% share of jointly held assets steps up. The surviving spouse's 50% retains its original cost basis. For couples with highly appreciated community property (Amazon stock, Microsoft RSUs vested during the marriage, a home bought 25 years ago), the double step-up is extraordinarily valuable:

For the WA HNW couple with a $5M stock portfolio purchased over a 25-year career, the difference between a CP double step-up and a JTWROS partial step-up can be $500,000+ in capital gains tax saved — purely from the titling advantage that comes with WA community property law.

Preserve the CP status of your assets. Key risk: if a WA couple moves separate-property assets into a joint revocable trust without clear documentation, or if they commingle CP with separate property, they may lose the double step-up benefit. Work with a WA-licensed attorney to ensure revocable trust language preserves the CP character of contributed assets. See the community property estate planning guide for a fuller treatment.

The Washington capital gains tax — and its estate planning interaction

Washington enacted a 7% capital gains tax on gains above $270,000 per person (indexed).⁶ This applies to the sale or exchange of long-term capital assets including stocks, bonds, and business interests — but not real estate (which is taxed separately via the WA real estate excise tax) and not retirement accounts.

The WA capital gains tax interacts with estate planning in several ways:

• Hold-until-death strategy becomes even more valuable in WA. The federal step-up in basis at death eliminates the capital gains tax. Because WA has both a 7% capital gains tax and no income tax, Washington residents have an even higher effective capital gains rate than the federal-only rate. Holding appreciated assets until death — where the step-up eliminates both the federal 23.8% and WA 7% gains — is a dominant strategy for WA residents who don't need liquidity.
• Gifting appreciated assets triggers WA capital gains. Unlike federal law (where gifts carry over basis without triggering tax), WA's capital gains tax applies when WA residents sell or exchange assets. But gifting itself is not a realization event under WA law — the gain is triggered if the recipient later sells. For assets with large embedded gains, holding until death (step-up) beats gifting in most scenarios unless the WA estate tax savings on the gift are substantial.
• Charitable strategies. Donating appreciated stock to a DAF or CRT avoids the WA capital gains tax entirely on the contributed gain, and also removes the asset from the WA taxable estate. For a WA family with low-basis concentrated tech stock, a DAF donation eliminates both the 23.8% federal rate and the 7% WA rate — a combined 30.8% tax avoidance on the donated position.

The family-owned business deduction

Washington provides an additional $2.5M deduction from the WA gross estate for qualified family-owned business interests (FOBIs) — but only for businesses with a total value under $6M.¹ For business owners who qualify:

• Effective exemption = $3M + $2.5M = $5.5M per person
• The business must be family-owned and operated — generally, the family must have owned at least 50% of the business for the 5 years before death and the heir must continue operating it
• The deduction is proportional if the family owns less than 100%

For most WA business owners with estates above $6M (the FOBI qualification ceiling), the deduction doesn't apply — but for those at the margin ($4M–$6M total estate, family business under $6M value), this provision can eliminate WA estate tax entirely.

Planning strategies for WA families

1. Credit shelter trust — the foundation

Every married WA couple with a combined estate above $3M should have a credit shelter trust funded at the first death. The trust shelters the first spouse's WA exemption; the surviving spouse can receive income and HEMS distributions without the trust assets being taxed at the second death. Without a credit shelter trust, a couple with a $10M estate wastes one spouse's entire $3M WA exemption — at the 16% WA rate that applies around that bracket, that's up to $480,000 in avoidable WA estate tax.

WA-specific note: Because Washington is a community property state, extra care is needed in funding the credit shelter trust. At the first death, only the deceased spouse's share of community property — 50% — can be used to fund the trust without consent issues. Work with a WA attorney to ensure the trust agreement properly handles CP assets.

2. Annual gifting — zero WA consequence

No WA gift tax. No WA lookback. Every dollar gifted under the federal $19,000/year annual exclusion permanently escapes the WA estate tax. A WA couple should structure a systematic gifting calendar: $38,000/year to each adult child, grandchildren, $95,000/$190,000 529 superfunding, and unlimited direct tuition/medical payments. This is the simplest, most certain WA estate tax reduction strategy — and uniquely powerful in WA because most comparable states impose either a state gift tax or a lookback.

3. Irrevocable trust strategies: SLAT, GRAT, IDGT

For WA families with estates significantly above $3M, the annual exclusion alone may not move fast enough. Irrevocable trust strategies remove larger amounts from the WA taxable estate:

• SLAT: Transfers assets to an irrevocable trust for the non-donor spouse's benefit. Assets and all future appreciation leave the WA taxable estate permanently. At the WA rate, removing $5M from the WA estate — which grows to $8M by the second death — saves approximately $720,000–$800,000 in WA estate tax alone, before considering any federal tax savings.
• GRAT: Transfers future appreciation above the §7520 rate (5.00% in 2026) to heirs with minimal gift tax cost. A zeroed-out GRAT uses no federal lifetime exemption on net. For WA tech employees with concentrated equity (pre-IPO, ESPP, company RSUs), GRATs are a direct route to moving expected appreciation out of both the federal and WA taxable estates.
• IDGT installment sale: Sell an appreciating asset to an irrevocable trust at the AFR rate (4.08% mid-term in 2026). All future appreciation above the AFR exits the estate — no WA estate tax, no capital gains on the grantor-trust sale under Rev. Rul. 85-13. For WA founders with closely-held equity pre-liquidity, an IDGT can move $5M–$20M of future appreciation out of the WA estate at minimal current cost.

4. Irrevocable life insurance trust (ILIT)

A survivorship (second-to-die) life insurance policy held in an ILIT pays outside both spouses' WA and federal taxable estates. For a WA couple facing a $300K–$700K WA estate tax bill, a $1M–$1.5M survivorship policy funded with Crummey annual exclusion gifts converts a guaranteed tax liability into a transferable benefit — at a fraction of the estate tax cost, especially at younger ages.

5. Charitable strategies

Charitable giving reduces the WA gross estate dollar-for-dollar:

• DAF bequest: Naming a donor-advised fund as the beneficiary of a revocable trust or IRA reduces the WA estate at death. For WA residents with large IRAs (which get no step-up and are taxed as ordinary income to heirs), naming a DAF as IRA beneficiary eliminates both the WA estate tax on that amount and the income tax heirs would owe — a double-tax elimination.
• Charitable remainder trust (CRUT): Transfer appreciated stock to a CRT — avoid the WA capital gains tax (7%) and federal capital gains (23.8%), receive an income stream, and reduce the WA gross estate. The remainder goes to charity at death, further reducing the WA estate.
• Charitable lead annuity trust (CLAT): If the portfolio can beat the §7520 hurdle (5.00% in 2026), a CLAT transfers the excess return to heirs outside the WA taxable estate while providing years of charitable deductions against ordinary income.

6. Relocation to a no-estate-tax state

Moving domicile out of Washington eliminates WA estate tax on all non-WA-situs property. Common destinations for WA HNW families: Nevada (no estate tax, no income tax, favorable trust laws), Idaho (no estate tax), Wyoming (no estate tax, strong asset protection trust laws, dynasty trusts), Colorado, or Arizona.

What remains taxable after relocation: Washington-situs real property. WA taxes the estates of non-residents on WA real estate at death, using a proportional formula based on WA property's share of the federal gross estate. A family that moves to Nevada but retains a Seattle home continues to owe WA estate tax on that property. Planning options: sell the WA real estate before death (step-up in basis eliminates capital gains), or transfer to an LLC (though WA may assess depending on facts).

Non-residents: WA taxes WA-situs property

Washington estate tax is not limited to WA residents. A non-resident who dies owning real property in Washington owes WA estate tax on a proportional share of their estate. The WA estate tax is calculated as:

(WA gross estate / Federal gross estate) × Tentative WA tax on federal gross estate

The WA exemption is applied proportionally — not as a flat deduction off the top. For a non-resident with $3M in WA real estate and $12M in out-of-state assets ($15M total federal gross estate), the WA fraction is 3/15 = 20%. The WA estate tax is 20% of the tentative WA tax computed on a $15M estate. WA-situs real estate for this purpose includes physical real property located in Washington — commercial buildings, single-family homes, vacation property, timberland, farmland.

Case study: Amazon/Microsoft executive in the Seattle area

Background: David and Sarah, ages 60 and 57, live in Bellevue, WA. David is a senior director at a major Seattle-area tech company. Combined estate: $14M — $5M in company stock (community property, much low-basis), $4M home (community property), $3M brokerage (community property), $2M 401(k)/IRA. No estate planning done beyond basic wills from 2015.

Federal exposure: None. $14M < $15M federal exemption (OBBBA). No federal estate tax if David dies first — and the survivor has portability available (though it's largely irrelevant given the $15M threshold).

WA exposure: Very real. At $14M total, the WA taxable estate at the second death is $11M above the $3M WA exemption. At the 10%-20% graduated rate, WA estate tax at the second death: approximately $1.5M–$2.0M.

Solution A — Credit shelter trust at first death: David's will/trust is amended to fund a credit shelter trust of $3M at his death. Sarah receives the remaining $11M with the unlimited marital deduction. At Sarah's death: $11M – $3M WA exemption = $8M WA taxable. WA tax: approximately $1.1M–$1.4M — an improvement, but the estate has grown.

Solution B — Annual gifting + SLAT: Starting today, David and Sarah give $38,000/year to each of two adult children and three grandchildren ($190,000/year). Over 15 years: $2.85M removed from the WA estate — before growth. Simultaneously, David funds a SLAT with $5M in low-basis company stock. The stock grows to $9M by the second death inside the trust — completely outside the WA estate. Remaining WA estate at second death: $14M – $5M (SLAT) – $2.85M (gifts) – $3M (WA exemption) = $3.15M WA taxable. WA tax: approximately $475K. Savings vs. doing nothing: $1M–$1.5M.

Community property advantage: David's company stock was acquired during the marriage as RSUs (community property). At David's death, the full $5M stock position steps up to current fair market value — both his 50% and Sarah's 50%. If Sarah sells the entire position the day after David's death, she owes zero capital gains (federal or WA). This is a $4.5M–$4.7M embedded gain eliminated by the CP double step-up.

Six costly Washington estate planning mistakes

1. Leaving everything to the surviving spouse without a credit shelter trust. The unlimited marital deduction avoids WA tax at the first death — but it forfeits the first spouse's $3M WA exemption. For a couple with $9M–$15M, this is a $310,000–$960,000 mistake. Credit shelter trusts are the most basic WA-specific planning tool and should be in every married couple's estate plan where the combined estate exceeds $3M.
2. Not gifting — especially for WA residents who can do so with zero state consequence. Most states with estate taxes impose a gift tax or lookback. WA does not. A WA family that fails to use the $38,000/year annual exclusion per recipient (married couple), the unlimited §2503(e) tuition exclusion, and 529 superfunding is leaving the most accessible WA estate tax reduction strategy on the table.
3. Assuming OBBBA fixed everything. OBBBA (July 2025) permanently eliminated federal estate tax concerns for the vast majority of WA families — $15M/person means most families don't have a federal problem. But WA's $3M exemption is entirely unaffected by federal law. A family exempt from federal estate tax can still owe $300K–$1.5M+ in WA estate tax. Many families got the OBBBA news and stopped planning. WA residents need to continue planning against the state tax.
4. Retaining WA real property after relocating to a no-estate-tax state. Moving to Nevada or Wyoming to avoid WA estate tax is effective for personal property — but the Seattle house stays on the WA return. At $1.5M–$3M in WA real estate value, the property can still generate a $150K–$350K WA estate tax bill even for a Nevada-domiciled taxpayer. Selling WA real estate before death — or timing a sale around the step-up — is cleaner.
5. Not preserving community property character in the revocable trust. WA CP assets that are retitled into a joint revocable trust must be documented as CP — or the trust agreement must clearly preserve their CP character — to preserve the IRC §1014(b)(6) double step-up at the first death. Using an online template trust that doesn't address CP can result in only a 50% step-up on assets that would otherwise qualify for the full 100% step-up. Over a 25-year career of RSU vesting, this can cost the surviving spouse hundreds of thousands in capital gains tax.
6. Missing the WA estate tax return deadline. The WA estate tax return (Form REV 85 0050) is due within 9 months of the date of death. Failure to file on time results in penalties and interest. Unlike federal law, there is no WA equivalent of the Rev. Proc. 2022-32 rescue procedure for missed portability elections — because WA has no portability to elect. The credit shelter trust must be in the estate plan documents before death, not added retroactively after the return deadline.