NEWS & RESOURCES

Authored by: Kyle Meissner, CPA, Wealth Advisor

If you’ve been hearing chatter about estate tax changes coming in 2025 and 2026, you’re not imagining things. Both Washington State and the federal government are adjusting their estate tax rules—and depending on your net worth, these updates could have a real impact on your long-term plans.

Here’s a simple breakdown of what’s changing and what it might mean for families in North Central Washington.

Washington State’s Estate Tax Is Getting a Makeover

Starting with deaths after June 30, 2025, Washington will change both the exemption amount (the amount you can pass on tax-free) and the tax rates themselves.

1. The State Exemption Is Jumping to $3,000,000. This is good news. The exemption is increasing from $2,193,000to $3,000,000. If your estate is under that amount, no state estate tax.

But—because home values and retirement accounts have grown so much—many families may be closer to that threshold than they realize, especially couples.

2. But… the Highest Tax Rate Is Increasing to 35%. Washington’s top estate tax bracket (for taxable amounts $9 million and above) is going up from 20% to 35%. That’s a big jump and will especially affect larger estates, business owners, and anyone with significant real estate holdings.

Federal Estate Tax Changes Are Coming Too

On the federal side, the current high exemption expires at the end of 2025. So starting January 1, 2026, the federal estate tax exemption is $15 million per person.

A key difference: The federal exemption is “portable.” If one spouse passes away without using their full exemption, the unused amount automatically transfers to the surviving spouse. So federally, a married couple could have up to $30 million sheltered.

Washington does not allow portability. This means that without proper planning, a married couple could unintentionally lose one spouse’s $3 million Washington exemption. For any couple with more than $3 million in combined assets, it’s incredibly important to review your will or trust with an estate planning attorney to make sure it’s structured correctly.

How High Could Combined Taxes Go? Higher Than Most People Expect

For very large estates (those over $15M for an individual or $30M for a couple), the combined federal + Washington State estate tax can be hefty.

• Combined rates start at 48%
• For the federally taxable portion above $1 million, the rate can climb up to 75%

This is one reason proactive planning is so important. You don’t want half your estate going to taxes simply because key planning wasn’t done in time.

So… What Can You Do Now? Plenty.

There are several tools families can use to reduce—or even avoid—Washington estate tax. These are especially worth considering for estates between $3M–$15M, where state tax planning creates the biggest benefit.

1. Make Strategic Gifts During Your Lifetime. Gifts can help reduce your estate size.

• You can give up to $19,000 per person, per year without using any of your federal exemption.
• If you gift more than that, it will reduce your federal lifetime exemption but won’t affect your Washington exemption at all.

This makes lifetime gifting particularly effective for Washington estate tax planning.

2. Consider Changing Your State Residency. Some Washington retirees eventually move to states without estate taxes. If that’s something you’ve thought about anyway, it can also reduce your tax exposure. To qualify as a resident of another state, you generally need to:

• Spend more than half the nights of the year there
• Maintain a home there
• Register to vote
• Update your driver’s license and other documentation

However—Washington estate tax still applies to real estate you own in Washington. So even if you move, a Wenatchee rental, cabin, or orchard property stays taxable.

3. Look Into the Family-Owned Business Exclusion. Washington has a special benefit for small family businesses valued at $6 million or less. To qualify:

• The business must be owned by the decedent or their family
• It must make up more than 50% of their total estate
• The family must continue operating the business for three years after the decedent’s passing

This can be very valuable for local orchards, farms, shops, and other small businesses passed from one generation to the next.

Start the Conversation

One of the biggest mistakes I see is families waiting until it’s “necessary” to talk about estate planning. But the truth is:

• Tax laws are changing
• Asset values are rising
• And smart planning can significantly reduce your tax burden

If your net worth is approaching or over $3 million, it’s worth having a conversation now so you can take full advantage of the strategies that make sense for your situation.

If you’d like help reviewing your estate plan from a tax perspective—or if you just want to better understand how these changes might affect you—we’re here to help.