Washington currently imposes estate tax on the estate of any individual who dies with an estate valued in excess of $2,193,000 if that individual was either a Washington resident or owned Washington property at the time of their death. The $2,193,000 exemption has not changed since 2018.
Why is the Exemption Frozen?
From 2006 through 2013, the exemption amount was set at $2,000,000. Then, in 2013, the Washington legislature enacted changes to Washington estate tax statute (Chapter 83.100 RCW) requiring the exemption amount to be adjusted annually for inflation as determined by the most recent October consumer price index (“CPI”) for the Seattle-Tacoma-Bremerton metropolitan area. So, from 2014 through 2018, the exemption increased marginally each year to mirror inflation, reaching $2,193,000 in 2018. However, in 2018 the United States bureau of labor statistics stopped calculating CPI for the Seattle-Tacoma-Bremerton area and began calculating the CPI for the Seattle-Tacoma-Bellevue area instead. The effect of the Bremerton/Bellevue swap is that the exemption amount is “frozen” in perpetuity at $2,193,000 unless or until the Washington legislature fixes the language in the statute.
Proposed 2025 Legislation
While legislation has been introduced in past years to correct the Bremerton/Bellevue issue and return to making annual inflation adjustments to the exemption amount, those proposals have not gotten much traction. However, there are currently three separate bills which have been introduced in the 2025 regular legislative session that propose to increase the exemption. Each bill is summarized below:
- HB 1375. HB 1375 was introduced in the House of Representatives on January 17, 2025 and is currently in consideration with the House Committee on Finance. HB 1375 would increase the exemption to $2,959,000 for any individuals dying after August 1, 2025, and beginning in 2026, the exemption amount would be adjusted each year based on the CPI of the “Seattle area,” in the preceding October. “Seattle area” is defined as the geographic area sample that includes Seattle. Ryan Montgomery, an estate planning attorney in our office, co-authored and circulated a letter supported by more than 100 local attorneys and other professionals to Representatives April Berg, Chair of the House Committee on Finance in support of HB 1375.
- SB 5405. SB 5405 was introduced in the Senate on January 21, 2025 and is currently in consideration with the Senate Committee on Ways and Means. SB 5405 proposes to, beginning with individuals dying in 2026, adjust the exemption amount each year based on the CPI of the “Seattle metropolitan area” in the preceding October. “Seattle area” is defined as the geographic area sample that includes Seattle and its surrounding areas.
- HB 2019. SB 5405 was introduced in the Senate on January 21, 2025 and is currently in consideration with the Senate Committee on Ways and Means. SB 5405 proposes to, beginning with individuals dying in 2026, adjust the exemption amount each year based on the CPI of the “Seattle metropolitan area” in the preceding October. “Seattle area” is defined as the geographic area sample that includes Seattle and its surrounding areas.
To further summarize the effect of each bill:
- HB 1375
- Exemption remains at $2,193,000 for decedents dying through July 31, 2025
- Exemption increases to $2,959,000 for decedents dying on August 1, 2025 through the end of 2025; and
- Exemption increases annually for inflation beginning in 2026.
- SB 5405
- Exemption remains at $2,193,000 for decedents dying through the end of 2025; and
- Exemption increases annually for inflation beginning in 2026.
- HB 2019
- Exemption increases to $3,000,000 for decedents dying in 2025;
- Exemption increases annually for inflation beginning in 2026: and
- Substantial increases to marginal tax rates beginning with decedents dying on or after January 1, 2025.
Takeaways
Each of the proposed bills discussed above would “unfreeze” the exemption amount, but each in a slightly different manner. While it is difficult to know which, if any, of these bills will become law, the fact that three separate bills seek to resolve the issue is evidence that there is growing support to find a solution. In practical terms, an increase in the exemption amount means fewer estates will be subject to Washington estate tax and, in the case of an estate that is taxable, a smaller portion of the estate will be subject to tax. Thus, any increase in the exemption would likely reduce the total estate tax revenue for the state, and could run into opposition from congresspersons concerned about the impact on the state budget. HB 2019 presumably seeks to offset the revenue reduction by increasing the marginal rates. However, the rate increases it proposes are substantial (the top rate is nearly doubled), and drastic rate increases such as these have been unpopular in the past. In the event HB 2019 is enacted, individuals with taxable Washington estates should revisit their estate plans, as a significantly larger portion of their estates could be subject to estate tax than under current law. Among other issues, individuals should consider whether their estate will have the liquidity to pay increased taxes, and whether lifetime gifting or other estate planning strategies should be employed to reduce their Washington taxable estate.
If you have any questions regarding how these proposed bills could affect your estate plan if enacted, or if you have any other questions regarding your estate plan, please reach out to one of the estate planning attorneys at Montgomery Purdue.